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    325 1236175264 master thesis final version (1) 325 1236175264 master thesis final version (1) Document Transcript

    • The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs A quantitative research on cognitive biases that explain entrepreneurial behaviour of both independent entrepreneurs and intrapreneurs Ahmed Bulut VU University Amsterdam Master thesis Faculty of Social Sciences Strategy, Communication & Organization August 2008 First instructor: dr. Ingrid Wakkee Second instructor: drs. Eveline Stam
    • Ahmed Bulut Table of contents PREFACE ______________________________________________________________________ 3 1. INTRODUCTION______________________________________________________________ 4 1.1 RESEARCH GROUND __________________________________________________________ 4 1.2 CENTRAL QUESTION __________________________________________________________ 6 1.3 THEORETICAL RELEVANCE _____________________________________________________ 8 1.4 PRACTICAL RELEVANCE _______________________________________________________ 9 1.5 CENTRAL CONCEPTS _________________________________________________________ 10 1.6 THESIS STRUCTURE __________________________________________________________ 11 2. THEORY ____________________________________________________________________ 12 2.1 OPPORTUNITY RECOGNITION __________________________________________________ 2.2 TWO LINES OF OPPORTUNITY EXPLOITATION ______________________________________ 2.2.1 Independent entrepreneurship ______________________________________________ 2.2.2 Intrapreneurship ________________________________________________________ 2.3 COGNITIVE BIASES __________________________________________________________ 2.3.1 Overconfidence _________________________________________________________ 2.3.2 Illusion of control _______________________________________________________ 2.3.3 Representativeness_______________________________________________________ 2.3.4 Status quo bias__________________________________________________________ 2.4 RISK PERCEPTION ___________________________________________________________ 2.5 THEORETICAL MODEL AND HYPOTHESES _________________________________________ 2.5.1 Cognitive biases and risk perception_________________________________________ 2.5.2 Risk perception and Entrepreneurial Orientation _______________________________ 12 12 14 14 16 16 16 17 17 18 19 19 24 3. RESEARCH METHOD ________________________________________________________ 26 3.1 RESEARCH METHOD _________________________________________________________ 3.2 RESEARCH BIASES, RELIABILITY AND VALIDITY ____________________________________ 3.3 PRE-TEST __________________________________________________________________ 3.4 OPERATIONALIZATION _______________________________________________________ 3.4.1 Entrepreneurial Orientation (E.O.)__________________________________________ 3.4.2 Overconfidence _________________________________________________________ 3.4.3 Illusion of control _______________________________________________________ 3.4.4 Representativeness_______________________________________________________ 3.4.5 Status quo bias__________________________________________________________ 3.4.6 Risk perception _________________________________________________________ 3.4.7 General background and controls ___________________________________________ 3.5 HANDLING PROCEDURE _______________________________________________________ 3.5.1 General procedure_______________________________________________________ 3.5.2 Handling of the data _____________________________________________________ 3.5.3 Checking for biases ______________________________________________________ 3.6 FACTOR ANALYSIS AND RELIABILITY ANALYSIS____________________________________ 3.6.1 Confirmatory factor analysis_______________________________________________ 3.6.2 Reliability analysis ______________________________________________________ 26 29 31 31 31 32 32 33 33 34 34 35 35 35 36 36 36 38 4. RESULTS____________________________________________________________________ 39 4.1 DESCRIPTIVES ______________________________________________________________ 39 4.2 HYPOTHESES TEST ___________________________________________________________ 40 5. DISCUSSION ________________________________________________________________ 44 5.1 FINDINGS __________________________________________________________________ 44 5.2 THEORETICAL IMPLICATIONS __________________________________________________ 45 The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 1
    • Ahmed Bulut 5.3 PRACTICAL IMPLICATIONS ____________________________________________________ 50 6. CONCLUSION _______________________________________________________________ 53 6.1 RESEARCH CONCLUSIONS _____________________________________________________ 53 6.2 LIMITATIONS _______________________________________________________________ 55 REFERENCES _________________________________________________________________ 57 APPENDIX 1: INVOLVED PARTIES ______________________________________________ 64 APPENDIX 2: QUESTIONNAIRE _________________________________________________ 65 APPENDIX 3: QUESTIONNAIRE (TRANSLATED) _________________________________ 70 APPENDIX 4: ADDITIONAL STATISTICS_________________________________________ 76 The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 2
    • Ahmed Bulut Preface Ultimately, I did it! Before starting to write this master thesis, I knew that it was the final challenge to bring my academic skills into practice. By carrying out my research, step by step, I discovered that making a contribution to science is not difficult. What is needed is just good reasoning, especially analogically, and finding practical evidence for your way of thinking. Specifically, it was a great pleasure for me to think about ways to question existing knowledge about entrepreneurship. Looking for the truth, then, is a very nice activity and fortunately, I felt the importance of constantly deepen into literature and thinking about the authors’ route in ending up into knowledge. I wrote this master thesis for the final part of my master education program Strategy, Communication & Organization at the VU University in Amsterdam. Completing this master thesis could not be happen without the involvement of several people and parties. First, I would like to thank dr. Ingrid Wakkee for her suggestions and commitment to my research. I would also thank drs. Eveline Stam for her comments upon my research. Also, I am very grateful to ABN AMRO for its interest and great assistance in my research. Most significantly, Jaspar Roos was deeply involved in the course of my research. Thank you so much! I also appreciate the involvement of secondary parties, i.e. VNO-NCW, Philips, Kobalt and Vesting Finance. And last but not least, I would like to thank my family for their support and patience while carrying out my research. Amsterdam, August 2008, Ahmed Bulut The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 3
    • Ahmed Bulut 1. Introduction In this first chapter, I will explain the research question of my master thesis. Also, an initial background of the research question will be given, in order to understand the theoretical relevance of my research. Furthermore, I will explain why my research is important for practioners. Additionally, I will define the central concepts of this thesis. Finally, the outline of the next chapters will be given. 1.1 Research ground The entrepreneurship and intrapreneurship fields receive considerable attention today. There is a growing call for the establishment of a theoretical framework within these fields. For example, Shane and Venkataraman (2000) argue that theory within the entrepreneurship literature is underdeveloped. By the same token, they argue, data are difficult to obtain in this field. Similarly, Bruyat and Julien (2003) argue that it is time to develop theoretical tools, in order to enable progress in the field of entrepreneurship. Therefore, exploring gaps in the entrepreneurship research is a serious task for scholars. Fortunately, scholars are devoting the required attention to entrepreneurship in the recent years. The same applies to entrepreneurship within an organization, also known as intrapreneurship. This is argued to be a subfield of entrepreneurship, in which research is growing (Antoncic & Hisrich, 2003). In fact, intrapreneurship is in bloom, as we will see later. Why is entrepreneurship so important? The importance of it becomes clear when we look at the consequences of engaging in entrepreneurship. Fortunately, these are more or less known. For example, engaging in intrapreneurship1 will lead to improved financial performance, especially in hostile environments (Zahra & Covin, 1995). Similarly, Morris and Sexton (1996) found that entrepreneurial intensity2 has a significant relationship with five out of six performed performance measures. With respect to the strategic management literature, the resource based view of the firm (RBV) suggests that those with an entrepreneurial cognition can facilitate a potential competitive advantage (Alvarez & Busenitz, 2001). In modern open economies, it is more important for economic growth than it has ever been (Wennekers & Thurik, 1999), for example in terms of employment and GDP creation (Van Praag & Versloot, 2007). In sum, from an economic point of view, engaging in entrepreneurship seems profitable for firms. 1 Including components were: (1) product innovation, (2) proactiveness, and (3) risk taking. Zahra and Covin (1995) label intrapreneurship as corporate entrepreneurship. 2 This encompasses the (1) frequency and (2) degree of entrepreneurship. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 4
    • Ahmed Bulut After given some attention to the consequences of entrepreneurship, the antecedents that determine whether one engages in entrepreneurial activities are numerous. These antecedents could be classified into several categories. According to Shook et al. (2003), the enterprising individual consists of three parts: (1) psychological (e.g. personality and beliefs), (2) characteristics (e.g. demographics and abilities) and (3) cognitions (content and process). With respect to the latter, content focuses on knowledge structures, while process focuses on biases and heuristics. Shook et al. (2003) argue that the threefold parts of the individual influence all aspects of the venture creation model.3 Indeed, Shook et al. (2003) try to systematize the antecedents of entrepreneurial behaviour in a framework that consists of personal attributes. Another possibility is to look at the entrepreneurial opportunities themselves and how potential entrepreneurs deal with them. According to Shane and Venkataraman (2000), the decision to exploit opportunities depends on the nature of the opportunity and on individual differences. With respect to the latter, the authors distinguish between (1) differences in weighting the value and costs of the opportunity, (2) differences in perceptions (e.g. in willingness to bear risk), (3) differences in optimism and (4) differences in willingness to exploit opportunities. Furthermore, with respect to knowledge, information possessed by potential entrepreneurs may lead to the discovery of entrepreneurial opportunities and to the exploitation of these discovered entrepreneurial opportunities (Shane, 2000). Finally, experience with earlier ventures can trigger entrepreneurs to additional pursuit of entrepreneurial activities (Alvarez & Busenitz, 2001). There are several fields that shed light on the factors that explain the occurrence of entrepreneurial behaviour; I will focus on cognitive biases that can influence entrepreneurial behaviour. First, scholarly research on cognitions has yielded conflicting results in the past (Chell et al., 1991). Second, as compared to traits of entrepreneurs, cognitions give better explanations of entrepreneurial behaviour (Simon et al., 1999). By the same token, cognitions are not stable attributes, but changeable and open to be influenced. For example, emotion and affect can influence a variety of entrepreneurial cognitions (Mitchell et al., 2007). And theoretically, there are many unanswered questions in the cognitiveentrepreneurial field (Shook et al., 2003). For example, these authors wonder whether individual factors help to explain why one chooses to start a new venture instead of selling the innovation to an existing firm. At the same time, there is a growing attention to the biases and heuristics with regard to entrepreneurial business decisions (Miner & Raju, 2004). Both these gaps give a drive to do research on biases and its influence on entrepreneurial decisions. In the next paragraphs, I will explain the question to be answered with this master thesis. 3 The model in question here is depicted as: entrepreneurial intent decision to exploit by new venture creation opportunity search and discovery opportunity exploitation activities. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 5
    • Ahmed Bulut Before turning back to the topic, it is useful to highlight which part of the entrepreneurial process is central in this thesis. In their review, Van der Veen and Wakkee (2006) argue that activities that lead to the exploitation of entrepreneurial opportunities could be seen as an iterative process. The process consists of five steps: (1) initial idea, (2) business opportunity (under influence of attainable resources and perceived market need), (3) decision to exploit, (4) constructing a resource base and (5) exchange with the market. This process, they argue, would constantly be influenced by two mechanisms: (1) the actor and (2) the environment. In my thesis, I will focus on entrepreneuring individuals, whether or not exploiting entrepreneurial opportunities. 1.2 Central question The conceptual model of De Carolis and Saparito (2006) is the starting point for this master thesis, in which the authors connect three cognitive biases to entrepreneurial actions (see figure 1). Overconfidence Illusion of control Representativeness – – Risk perception – Exploitation of entrepreneurial opportunities – Cognitive biases Figure 1 – Adjusted conceptual model of De Carolis and Saparito (2006). The rationale behind the theoretical model of De Carolis and Saparito (2006) will be discussed in the second chapter. In brief, De Carolis and Saparito (2006) argue that three cognitive biases reduce the level of perceived risk, which result in risky actions. Although De Carolis and Saparito (2006) additionally put forward that these cognitive biases are preceded by social capital factors, I only focus on the part depicted in figure 1. Although the model in figure 1 was tested empirically by Simon et al. (1999) and to a large extent replicated by Keh et al. (2002), I think that this model can refined in three ways. First, in a recent study on the decisions of entrepreneurs, it is argued and partly empirically affirmed that many of the decisions made by entrepreneurs suffer from the status quo bias (Burmeister & Schade, 2007).4 The authors define status quo as ‘the behavioural tendency to decide for a status quo option disproportionately often’ (ibid., p. 343). Burmeister and Schade (2007) argue that people rely 4 However, the authors found also that with respect to status quo bias, entrepreneurs do not differ significantly from others. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 6
    • Ahmed Bulut on what they have chosen before. Accordingly, I think that this bias could reduce risk perception among entrepreneurs. Adding the status quo bias as an antecedent of risk perception will complete the picture. I will elaborate this argument further in chapter 2. Second, Simon et al. (1999) tested their model among students. I argue that testing the model among students is maybe more appropriate as a control group. Basically, it is an independent entrepreneur or intrapreneur who decides to engage in entrepreneurial behaviour. Scholarly research in entrepreneurship (and starting new ventures) among students does not generalize to real world entrepreneurs (Robinson et al., 1991). Therefore, from a methodological point of view, in involving actual entrepreneurs and intrapreneurs, one can make better predictions about entrepreneurial behaviour. Indeed, an important shortcoming of laboratory research is that the external validity of the results can be questioned (Davidsson, 2005). Third, and related with the previous argument, the model is too general. The model in figure 1 suggests that it holds true for everyone who engages in entrepreneurial behaviour. Thus, it does not reckon with the distinction between independent entrepreneurship (i.e. starting a new firm) and corporate entrepreneurship (i.e. starting a new venture within an existing firm). This point is fundamentally important. In his review, Forbes (1999) concludes that too many studies hold the assumption that entrepreneurs as a group are homogenous. According to him, this assumption may be unreliable, in referring to studies in which heterogeneity exists with regard to entrepreneurial cognitions. Specifically, the exploitation of an opportunity can be labelled as either independent entrepreneurship or intrapreneurship. In their empirical research on biases and heuristics, Busenitz and Barney (1997) found that entrepreneurs are more overconfident and are manifesting representativeness more extensively than do managers in large organizations. I would like to extend this finding. While managers, like corporate entrepreneurs, work for organizational gain, I think that corporate entrepreneurs will show less cognitive biases than do independent entrepreneurs. Conversely, independent entrepreneurs work for their own gain. They cannot wait until all the facts are known, because the opportunity they are seeking could be gone by the time more complete data becomes available (Stevenson & Gumpert, 1985 in: Busenitz & Barney, 1997). Therefore, independent entrepreneurs would be more susceptible for cognitive biases than intrapreneurs. Finally, methodological literature on entrepreneurship suggests that comparing entrepreneurs with nonentrepreneurs may not fruitful (Davidsson, 2005). Here, then, I will compare two groups within the larger set of entrepreneurs. As Hisrich et al. (2007) rightly mention, the nature of the cognitive processes underlying opportunity recognition and exploitation deserves more attention. The purpose of my thesis is filling the above The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 7
    • Ahmed Bulut mentioned gaps, in which I will refine the model as presented in figure 1. These arguments lead to the central question of my thesis, which could be described as: How do cognitive biases explain entrepreneurial behaviour in differentiating independent entrepreneurship and intrapreneurship? This broad defined central question entails several sub questions, which I separate as follows: 1. What distinguishes independent entrepreneurship from intrapreneurship? 2. How do independent entrepreneurs and intrapreneurs differ in entrepreneurial behaviour? 3. Which cognitive biases relate to entrepreneurial behaviour of these entrepreneurs? Exploiting entrepreneurial opportunities entails risky consequences, such as failures. Therefore, exploiting an entrepreneurial opportunity is a form of risky behaviour. In general, risky behaviour is preceded by risk perception and risk propensity. This is proposed by Sitkin and Pablo (1992). However, empirical research showed that only the former is causally related to risky behaviour. Additionally, in earlier entrepreneurship publications about cognitive biases and the exploitation of entrepreneurial opportunities, it was argued and empirically confirmed that risky action (like starting a firm) is preceded by lower risk perception (Simon et al., 1999). Accordingly, compared with others, entrepreneurs perceive less risk (Palich & Bagby, 1995). Risk perception is clearly a variable to reckon with in entrepreneurship research. Therefore, a fourth sub question will be answered in this thesis: 4. What is the function of risk perception among cognitive biases and entrepreneurial behaviour? All four questions will be answered in the theory section. The second, third and fourth questions will additionally be tested empirically. In this manner, the central question of this thesis can both theoretically and empirically bound. 1.3 Theoretical relevance One of the nouveau areas within the entrepreneurship literature is cognition (Baron, 2004), which is an understudied aspect of the enterprising individual (Shook et al., 2003). Within the cognition field, one of the issues that is not addressed is: do entrepreneurs reason or make decisions differently than other persons (Baron & Ward, 2004)? One of the examples these authors give concerns whether entrepreneurs differ from other persons in the ways in which they cope with conditions like cognitive errors (p. 558). The authors seek the importance of this issue in the fact that successes and failures of new firms often depends heavily on decisions reached by entrepreneurs. Here, I do not make a distinction between entrepreneurs and other people, but between independent entrepreneurs and intrapreneurs, an argument partially based on the findings of Busenitz and Barney (1997). These authors make a distinction between entrepreneurs and managers in large firms. Analogous, making a The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 8
    • Ahmed Bulut distinction between independent entrepreneurs and intrapreneurs is also interesting, because they cannot be considered the same. Furthermore, insight in the cognitive biases that influence risk perception and subsequent decision to exploit an opportunity is not fully developed yet. For example, the status quo bias (e.g. Burmeister & Schade, 2007) is not considered as an antecedent so far. With this thesis, reply will be given to the call for the refinement of the entrepreneurial cognition research on biases, as formulated by Mitchell et al. (2002): While previous research has examined cognitive biases, it has not thoroughly detailed the relationships between certain of the specific entrepreneurial cognition constructs in a specific context, such as the decision to pioneer (p. 98). Similarly, Forbes (1999) insists on exploring whether some entrepreneurs are more likely than others to show the cognitive processes associated with entrepreneurial cognitions (p. 430). Therefore, I will walk into a new avenue by comparing independent entrepreneurs with intrapreneurs. In doing so, scholars can gain more insight in the phenomenon of exploiting entrepreneurial opportunities – within the light of cognitive biases, that is. 1.4 Practical relevance In the global economy, organizations in the profit sector provide solutions to supply and demand of goods and services. It is the entrepreneur who decides to pioneer, in order to respond to market needs. Also, entrepreneurs provide an employment base. Without entrepreneurs, a good working economy is unthinkable. Getting insight in the factors that enhance entrepreneurial behaviour of entrepreneurs has many benefits. Specifically, if we know what cognitive biases affect entrepreneurial behaviour, a potential entrepreneur can estimate his level of entrepreneurial orientation. Similarly, larger organizations can screen potential intrapreneurs on the cognitive biases, in order to estimate whether these persons will behave entrepreneurially within the company. Also, larger organizations can develop a tool to estimate whether incumbent employees will show entrepreneurial behaviour. Dutch companies, especially the larger ones, are trying to get the personnel more entrepreneurial in the last years. According to the Dutch weekly magazine Intermediair, entrepreneurship ‘under the wings of the mother company’ fits within the trend in which employees want more freedom and responsibilities, without carrying risks. The results of this thesis will show whether intrapreneurs within large organizations are comparable to actual independent entrepreneurs with respect to cognitive biases. Additionally, companies wonder The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 9
    • Ahmed Bulut whether their personnel behave as entrepreneurial as independent entrepreneurs. This thesis will answer these questions. 1.5 Central concepts In this paragraph, I will shortly explore the concepts that fit in the area of entrepreneurial behaviour, cognitive biases and risk perception. Note that I will explore these concepts as loose bricks. In the second chapter, I will explore these constructs in more detail. Entrepreneur type An entrepreneur, in this thesis, could be an independent entrepreneur owning a firm with at least ten employees. An intrapreneur is an individual acting like independent entrepreneurs, but an intrapreneur does not work for self gain (as opposed to independent entrepreneurs). Entrepreneurial behaviour Entrepreneurial behaviour means practicing entrepreneurial mind, in which an individual takes risk, get involved in innovative actions and behave pro active. Cognitive biases Cognitive biases are mental shortcuts used to make judgments (e.g. Simon et al., 1999). Put differently, biases are decision rules, cognitive mechanisms, and subjective opinions that are helpful in making decisions on an effective and efficient manner (Busenitz & Barney, 1997). Thus, using cognitive biases makes it easier to take decisions quickly by relying on existing mental “rules”. Four cognitive biases central in this thesis are: (1) overconfidence, which is a mental failure, in which somebody does not know the limits of his or her knowledge (e.g. Russo & Schoemaker, 1992), (2) illusion of control, which is an expectancy of a personal success probability inappropriately higher than the objective probability would warrant (Langer, 1975), (3) representativeness,5 which means that one generalizes a situation from a sample to true facts and (4) status quo bias, which refers to solving a decision problem by doing nothing or maintaining a current or previous decision by an individual (Samuelson & Zeckhauser, 1988). Some scholars make a distinction between biases and heuristics, but actually cognitive biases emanate from heuristics (Bazerman, 1990 in: Simon et al., 1999). Busenitz and Barney (1997) combine both terms by using the name ‘biases and heuristics’ and ‘cognitive biases’ interchangeably. Recent publications about entrepreneurial cognitions (e.g. De Carolis & Saparito, 2006; Keh et al., 2002; Simon et al., 1999; Mitchell et al., 2002, 2007) employ the term “cognitive biases”. For clarity, I will 5 This is also called believe in the law of small numbers. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 10
    • Ahmed Bulut follow them. The term “cognitive bias” is consistent with the psychology literature (De Carolis & Saparito, 2006:45). Risk perception Risk perception is a decision maker’s assessment of the risk inherent in a situation (Sitkin & Pablo, 1992). This assessment is a subjective judgment (Keh et al., 2002). With regard to entrepreneurship, risk perception involves risk associated with a particular business situation (De Carolis & Saparito, 2006). 1.6 Thesis structure In this fist chapter, I shed light on the questions to be answered by this thesis, in depicting gaps in the entrepreneurship literature. Also, central concepts were defined, in order to establish a filled lens for the rest of this master thesis. The rest of this thesis is organized as follows. In the next chapter, I will present the theoretical model that I will test empirically. Before testing this, I will explain the method to be used in order to test the hypotheses. In the results section, I will explore the findings. After that, I will explain the findings in the light of the theory, as exposed in chapter 2. I will also give practical and theoretical implications of my findings. The thesis will end with a conclusion. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 11
    • Ahmed Bulut 2. Theory In this section of my thesis, I argue how the concepts as discussed shortly in paragraph 1.5 relate to each other, but only after made a thorough analysis of the concepts first. This will result in a conceptual model. In doing so, I will derive several hypotheses that would at the core of the empirical section of this thesis. 2.1 Opportunity recognition The exploitation of an entrepreneurial opportunity is the point where actual pioneers begin with their real adventure. Let me first illuminate what an entrepreneurial opportunity actually is. Within recent entrepreneurship literature, it is proposed that an entrepreneurial opportunity is a creative result from a scale, ranging from an initial insight to a fully shaped idea about starting and operating a business (Dimov, 2007:720). He also proposes that this idea development is influenced with the individual’s immediate and social context. The economic literature suggests that an entrepreneurial opportunity is characterized with profit seeking, in which new goods and services are introduced (e.g. Companys & McMullen, 2007). From both perspectives, however, an attempt to develop and market something new is an important element. The origins of entrepreneurial opportunities are immense. Holcombe (2003) proposes that the factors that create opportunities should be classified into three groups, viz.: (1) factors that disequilibrate the market, (2) factors that enhance production possibilities and (3) entrepreneurial activities that create additional future entrepreneurial possibilities. 2.2 Two lines of opportunity exploitation After having identified an entrepreneurial opportunity, one can decide to exploit it. The exploitation of an opportunity refers to those activities and investments committed to gain returns from the new product arising from the opportunity through the building of efficient business systems for full-scale operations (Choi & Shepherd, 2004). Note that this can entail many activities in general. For example, marketing managers are constantly seeking for opportunities. People with ambitions may decide to pursue the opportunity on behalf of the organization where he or she actually works, advising someone to pursue it, selling the opportunity to an organization, starting a new firm and so on. Classical literature focuses on new firm creation, whereas recent literature places more emphasis on entrepreneurship within a firm, generally known as intrapreneurship. Shane and Venkataraman (2000) distinguish between two forms of exploitation: (1) the creation of new organizations and (2) the sale of opportunities to existing firms. They argue that while the most entrepreneurial activities occur through the creation of new startups, some entrepreneurs behave in a manner in which they pursue entrepreneurial opportunities on behalf of their existing firms. Likewise, Hisrich (1990) makes a distinction between entrepreneurs (persons who start their own business) and intrapreneurs (entrepreneurship within an organization). As far as the latter is concerned, intrapreneuring thus does The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 12
    • Ahmed Bulut not necessarily require selling an opportunity to an existing firm, as opposed to the vision of Shane and Venkataraman (2000). Hisrich (1990) implicitly argues that both forms of pioneering overlap. According to him, intrapreneurs share the same entrepreneurial spirit as entrepreneurs (ibid., p. 209). In his later study, Hisrich et al. (2007) discuss several possible types of entrepreneurs, in which they also mention the distinction between entrepreneurs in absolute terms (i.e. new firm versus no new firm). Others argue that entrepreneurship should not be seen as a dichotomous variable, but as a scale from very weak to very strong entrepreneurial intensity (Morris & Sexton, 1996). In many empirical researches, distinction is made between independent venturing/entrepreneurship and corporate venturing (e.g. Schrader & Simon, 1997; Corbett & Hmieleski, 2007). As Sharma and Chrisman (1999) and Kunkel (2001) classify the many existing definitions and typologies of entrepreneurship, they argue that within entrepreneurship, a distinction should be made between independent entrepreneurship and corporate entrepreneurship. Entrepreneuring within a firm could be classified in four categories, which could be presented as corporate entrepreneurship as an umbrella. These are: (1) corporate venturing, (2) intrapreneuring, (3) organizational transformation and (4) industry rule-breaking (Thornberry, 2003), although others argue that corporate venturing and intrapreneurship are synonyms (Stopford & Baden-Fuller, 1994). With regard to the exploitation of an opportunity, De Carolis and Saparito (2006) see it as new firm creation, while Shook et al. (2003) advises to also consider existing organizations in future research: Another research opportunity regarding the decision to exploit opportunities by venture creation is to examine the role of individual factors on choice between markets and hierarchies. More specifically, do individual factors help to explain why individuals choose to create a new venture instead of selling the innovation to an existing firm? (p. 391). Like what Shane and Venkataraman (2000) do, Shook et al. (2003) talk about selling a pioneering idea to an existing firm. One can also decide to exploit an opportunity in this existing organization, instead of selling to it. This is what is called intrapreneurship. Indeed, intrapreneurship, like entrepreneurship, is one possible form of exploitation of entrepreneurial opportunities. In this thesis, exploitation of entrepreneurial opportunities means having started an own firm (i.e. independent entrepreneurship) or pursuing an entrepreneurial opportunity in favour of an existing organization (i.e. intrapreneurship), as mentioned in chapter 1. This distinction is in line with a systemization made by Sharma and Chrisman (1999) and partly in line with Hisrich (1990) and Hisrich et al. (2007), because corporate entrepreneurship encompasses intrapreneurship. According to Christensen (2004), intrapreneurship is the most appropriate label for entrepreneurship within an The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 13
    • Ahmed Bulut existing firm. In sum, the distinction between independent entrepreneurship and intrapreneurship seems 2.2.1 Independent entrepreneurship The most obvious manifestation of entrepreneurship is new firm creation (Antoncic & Hisrich, 2003) that is clearly a key issue in entrepreneurship (Shook et al., 2003). According to Pinchot (1985), an entrepreneur is someone who fills the role of an intrapreneur (see next sub paragraph) outside the organization (p. IX). With this in mind, the creation of a new firm is a necessary condition for calling somebody, who exploits entrepreneurial opportunities, an independent entrepreneur. Therefore, in highlighting the creation of a new firm and simultaneously pursuing entrepreneurial opportunities, the term independent entrepreneurship is used in this thesis. This argument is in line with existing literature on entrepreneurship (e.g. Alvarez & Busenitz, 2001; Busenitz & Barney, 1997; Sharma & Chrisman, 1999). The definition of independent entrepreneurship as given by Sharma and Chrisman (1999) seems most relevant: (…) the process whereby an individual or group of individuals, acting independently of any association with an existing organization, create a new organization (p. 18). Clearly, independent entrepreneurship entails the creation of a firm. But how does this manifest concretely? It is important to make this clear, because identifying entrepreneurs has been problematic in the past (Gartner, 1988 in: Busenitz & Barney, 1997). In their empirical study, Busenitz and Barney (1997) used two prerequisites to identify entrepreneurs. The first is responsibility. Drawing on previous research, they concluded that being responsible for an independent start-up is a criterion. Methodological entrepreneurship research suggests the same, namely that explicit consideration of new venturing is needed before placing an individual to the entrepreneurship domain (Davidsson, 2005). Thus, like what Hisrich (1990) states, an independent entrepreneur works for self gain. The second is involvement. According to Busenitz and Barney (1997), to be an entrepreneur, one must have started his or here venture within last two years. Or, he or she is planning on starting another venture within the next five years. Therefore, an independent entrepreneur should be actively involved with his or her company in order to call this person an independent entrepreneur. These two criteria will be adopted in this thesis. 2.2.2 Intrapreneurship Existing literature on entrepreneurship suggests that intrapreneurship is concerned with pursuing entrepreneurial opportunities on behalf of a company in which intrapreneurs work. Various terms are used to describe intrapreneurship. The most common are intrapreneuring, corporate entrepreneurship, internal corporate entrepreneurship and corporate venturing (Antoncic, 2007), although these terms are sometimes seen slightly different from each other. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 14
    • Ahmed Bulut Most studies regarding intrapreneurship refer to the work of Pinchot (1985), who espoused the term intrapreneuring. Typically, an intrapreneur is a corporate entrepreneur, which allows entrepreneurship to occur in an existing organization (Hisrich, 1990; Heinonen & Korvela, 2005), usually in large corporate settings (Thornberry, 2003). Intrapreneurs operate at organizational margins or boundaries, thus not at the core, which consists of the usual management (Antoncic & Hisrich, 2003). The definition of an intrapreneur as formulated by Hisrich (1990) is in line with the definition as given by Pinchot (1985). According to Pinchot (1985), an intrapreneur is someone who: (…) takes on hands-on responsibility for creating innovation of any kind within an organization. The intrapreneur may be the creator or inventor but is always the dreamer who figures out how to turn an idea into a profitable reality (p. IX, emphasis added). With this definition in mind, if an employee is willing to walk after entrepreneurial opportunities, he or she can decide to do so within a company. Or, by using Pinchot’s words, ‘you don’t have to leave the corporation to become an entrepreneur.’ For lasting intrapreneurship to be occurring, an intrapreneur should build new businesses continually. Therefore, according to Pinchot, the intrapreneur should get increasing freedom in order to use corporate resources. Which conditions are necessary to expect an organization in having intrapreneurs working? First, we have to consider intrapreneurship as a matter of degree, thus not as a categorization in a dichotomous fashion (Antoncic & Hisrich, 2003). In concrete terms, as compared to independent entrepreneurs, we can call someone an intrapreneur when (1) he or she is in the pay of an organization and (2) the company where he or she works has at least 50 employees. The first criterion stems from the fact that an intrapreneur works for organizational gain (Hisrich, 1990) and the second one originates from the principle that intrapreneurship usually occurs in large companies (Thornberry, 2003). Specifically, in doing empirical research among intrapreneurs, Antoncic (2007) postulated a lower limit of 50, although Stull (2005) aimed at 40 employees as criterion. Looking back on the discussion in this chapter, what distinguishes intrapreneurs from (independent) entrepreneurs? In general, the difference between them is that the former is for organizational gain and the latter for self gain (Hisrich, 1990). This is from an organizational and economic point of view. According to Hisrich (1990), intrapreneurs and entrepreneurs possess the same entrepreneurial spirit. The contribution of both entrepreneurs and intrapreneurs is that they both take new ideas or even working prototypes and turning them into profitable realities (Pinchot, 1985:32). Indeed, they both run one or more businesses for the sake of pursuing entrepreneurial opportunities The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 15
    • Ahmed Bulut 2.3 Cognitive biases Later in this chapter, I will argue that four cognitive biases – as introduced in the former chapter – are causally related to entrepreneurial behaviour, though not to the same extent. However, before arguing how these four cognitive biases relate to other constructs, it must first be clear what we exactly mean when we talk about these four cognitive biases. Note that I will only discuss four cognitive biases that are relevant in this thesis.6 People rely on a limited number of heuristics, which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations (Tversky & Kahneman, 1974). Das and Teng (1999) argue that decision makers rely on these few judgmental rules, in order to simplify complex decision situations. Decision makers are not only top executives and managers, but also entrepreneurs. These entrepreneurs are argued to be people that often work in situations and under conditions that would be expected to maximize the impact of such factors (Baron, 1998). Busenitz and Barney (1997) provide empirical evidence for the assertion that entrepreneurs make more use of biases than managers do. 2.3.1 Overconfidence Overconfidence is the first cognitive bias in the theoretical model of De Carolis and Saparito (2006). The overconfidence bias refers to the failure to know the limits of one’s knowledge (Russo & Schoemaker, 1992). It exists when decision makers are overly optimistic in their initial assessment of a situation, and then are slow to incorporate additional information about a situation into their assessment because of their initial overconfidence (Alpert & Raiffa, 1982 in: Busenitz & Barney, 1997). Early work on overconfidence (Oskamp, 1965) showed that increasing feelings of confidence are not a sure sign of increasing accuracy in drawing conclusions. Therefore, overconfidence is indeed a bias. Decision makers who are overconfident trait their assumptions as facts (De Carolis & Saparito, 2006; Simon et al., 1999) and empirical research has shown that entrepreneurs are more overconfident than managers (Busenitz & Barney, 1997). However, Barnes (1984) argues that overconfidence is dangerous, because it indicates that we actually know little. However, thanks to overconfidence, entrepreneurs behave entrepreneurially, as we will see. According to Busenitz and Barney (1997), the use of heuristics can, in general, lead to acceptable solutions for problems in an effective and efficient way. 2.3.2 Illusion of control The second cognitive bias that is central in De Carolis and Saparito (2006) is illusion of control. Illusion of control could be defined as an expectancy of a personal success probability inappropriately 6 For early work on cognitive biases as exhibited by decision makers, see Barnes (1984). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 16
    • Ahmed Bulut higher than the objective probability would warrant (Langer, 1975). This means that decision makers may overestimate the extent to which the outcomes of a strategy are under their control (Schwenk, 1984). Specifically, entrepreneurs strongly prefer exerting control to their outcomes, because they indeed believe they can exert control over people and events (Shaver & Scott, 1991 in: Keh et al., 2002). It may seem that the illusion of control bias resembles the overconfidence bias. That is, a decision maker who suffers from illusion of control overestimates his extent to which he controls a decision outcome. However, these two constructs differ. Overconfidence has to do with certainty of one’s knowledge (i.e. “facts”), whereas illusion of control has to do with ability in predicting different-tocontrol, future business events (Simon et al., 1999). 2.3.3 Representativeness The third type of cognitive bias in the model of De Carolis and Saparito (2006), then, is representativeness. It is a tendency to regard a sample as a representation; people consider a randomly sample as highly representative for the population in all essential characteristics (Tversky & Kahneman, 1971, 1974; Barnes, 1984), whatever the reliability of the evidence for that (Barnes, 1984). This generalizing situation is argued to be a common phenomenon for entrepreneurs (Katz, 1992 in: Busenitz & Barney, 1997). Schwenk (1984) argues that this generalizing process could be responsible for viewing strategic decisions as simple analogies. Furthermore, he proposes that decision makers tend to view the past as representative of the present and thereby offering solutions for problems that existed in the past. Busenitz and Barney (1997) provide empirical evidence that entrepreneurs experience much more representativeness than managers. In suffering from the representativeness bias, an individual bases his simplistic generalization in which the sample contains much positive information. This is because the smaller the sample, the greater the chance that an individual receives only positive information (Simon et al., 1999), with logical consequence that an individual does not see the true reality. A small and non-random sample is by definition not statistically valid (Keh et al., 2002) and is thus a bias. Here is an example of this bias. If a car salesman notices that he sells twice more cars than before, he would experience this as a rosy expectation for tomorrow. 2.3.4 Status quo bias The fourth type of cognitive bias not included in the study of De Carolis and Saparito (2006), but one that might highly relevant is the “status quo bias”. The status quo bias has got the attention from economic psychology, marketing and public health literature, but not from the entrepreneurship literature till now (Burmeister & Schade, 2007). Status quo means doing nothing or maintaining one’s The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 17
    • Ahmed Bulut current or previous decision (Samuelson & Zeckhauser, 1988:8). In recent research, a similar definition is proposed, namely ‘the behavioural tendency to decide for a status quo option disproportionately often’ (Burmeister & Schade, 2007:343). Decision makers often face this “problem” (Samuelson & Zeckhauser, 1988). Specifically: Instead of considering all available information in the decision making process, people tend to rely on what they have chosen before, on what represents the current state, or even what someone else has chosen for them and consequently is the status quo (Burmeister & Schade, 2007: 343-344). Many decisions depend on the status quo (Tversky & Kahneman, 1991). Are entrepreneurs, then, more affected by the status quo bias than others? Surprisingly, the answer is “no”. Specifically, in comparing entrepreneurs with bankers and students, entrepreneurs appear to be as biased as students, but less biased than bankers (Burmeister & Schade, 2007). This is a remarkable finding, because entrepreneurs are decision makers and could be expected as very compliant to the status quo bias in decision making. For example, Baron and Ward (2004) wonder whether entrepreneurs rely on the first decision that works instead of searching for new procedures. I think that the status quo bias should be reconsidered in searching for cognitive biases as antecedents of entrepreneurial behaviour, because repeating earlier made decisions enhances quick decision making and this may lower perceived risk in rejecting alternative decisions. Furthermore, a single study cannot constitute a sound empirical generalization (Aldrich, 2001), so it is worth to replicate those kinds of studies (ibid.). Therefore, I will use this construct by relating it to other constructs. 2.4 Risk perception Cognitive biases are argued to be antecedents of the entrepreneurial behaviour, but with mediating of risk perception. That is, cognitive biases affect risk perception associated with exploiting an entrepreneurial opportunity. Subsequently, this perceived risk perception leads to entrepreneurial behaviour. Early work on risk perception indicates that people are susceptible to perceiving lower risks than it actually appear (Slovic et al., 1980). Conceptually, risk perception is a decision maker’s assessment of the risk inherent in a situation (Sitkin & Pablo, 1992:12). Risk, then, is defined as the extent to which there is uncertainty about whether potentially significant and/or disappointing outcomes of decisions will be realized (Sitkin & Pablo, 1992). With respect to entrepreneurship, then, risk perception means ‘the beliefs about the magnitude of potential losses associated with a particular business situation’ (De Carolis & Saparito, 2006). This definition is concentrated on entrepreneurs and will be therefore adopted in this paper, as we focus on entrepreneurial behaviour as performed by independent entrepreneurs and intrapreneurs. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 18
    • Ahmed Bulut In the past, it was argued that risky decision making behaviour is preceded by both risk propensity7 and risk perception (Sitkin & Pablo, 1992). However, empirical research only supports the latter (Sitkin & Weingart, 1995; Weber & Milliman, 1997). Furthermore, the reason why risk perception instead of risk propensity is central in relevant studies (e.g. De Carolis & Saparito, 2006; Simon et al., 1999; Keh et al., 2002) and also in this thesis is that entrepreneurs do not prefer to take risk. Instead, they perceive less risk than nonentrepreneurs. Empirical support for this can be found in Palich and Bagby (1995) and Norton and Moore (2006). Thus, models in which risk perception mediates the effects of situational characteristics on decision making behaviour among decision makers make better explanations than direct effects models (Sitkin & Weingart, 1995; Weber & Milliman, 1997). 2.5 Theoretical model and hypotheses In this paragraph, I will make explicit how the above discussed concepts relate to each other. In doing so, I will derive six hypotheses. First, I will describe the relationship between cognitive biases and risk perception. Next, I will describe the relationship between risk perception and Entrepreneurial Orientation (E.O.). 2.5.1 Cognitive biases and risk perception With respect to entrepreneurial decision making, the relationship between overconfidence and risk perception was first espoused by Simon et al. (1999). Later, Keh et al. (2002) and De Carolis and Saparito (2006) adopted this in their studies. However, the influence of overconfidence on risk perception is relatively novel in the entrepreneurship literature. Early work on this relationship suggests that overconfidence is a bias that reduces risk perception (Slovic et al., 1980). However, this relationship was not proved among entrepreneurs in the eighties. Overconfidence occurs because of exaggerated feelings in analyzing new data (Simon et al., 1999). They argue that decision makers treat their initial assumptions as facts and are therefore blind to seeing uncertainties associated with conclusions that stem from those assumptions. Individuals base their certainty on the ease with which they can recall earlier reasons for confidence (Keh et al., 2002). Accordingly, these people erroneously conclude that taking action is not risky. Recall that entrepreneurs are more susceptible to overconfidence than their counterpart decision makers, namely managers (Busenitz & Barney, 1997). In a later study, this finding was reconfirmed (Forbes, 2005). As argued earlier, I reason that intrapreneurs will be less susceptible to cognitive biases than entrepreneurs. This has to do with the fact that intrapreneurs work for organizational gain, as opposed to entrepreneurs who work for self gain. The setting in which an intrapreneur operates (an existing 7 An individual’s current tendency to take or avoid risks (Sitkin & Weingart, 1995). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 19
    • Ahmed Bulut company) is totally different than of independent entrepreneurs, who have their own business. Overconfidence, then, enables an entrepreneur to proceed with an idea before all steps to that specific venture are fully known (Busenitz & Barney, 1997:15). Managers in large companies, on the other hand, do not have to rely on their personal confidence (ibid.). Therefore, they argue that entrepreneurs are more overconfident than managers. They provide empirical evidence for this proposition. Like managers, intrapreneurs work for organization gain, between the walls of an existing company. Also, managers have much in common with intrapreneurs: managers in corporations are almost always intrapreneurs (Geisler, 1993). Geisler argues that the survival and success of a changing company requires middle managers that act like intrapreneurs. In sum, independent entrepreneurs are more faced with situations in which they have to rely on cognitive shortcuts than intrapreneurs. An additional interesting argument can be found in Stevenson and Gumpert (1985, in: Busenitz & Barney, 1997). They argue that (independent) entrepreneurs cannot wait till all the facts are known, because the opportunity they are seeking for, can be gone by the time more complete data becomes available. Therefore, I think that intrapreneurs, while behaving entrepreneurially, would be less susceptible to the overconfidence bias than independent entrepreneurs. With this discussion in mind, I propose the following: H1a: Independent entrepreneurs and intrapreneurs exhibiting higher overconfidence will perceive less risk. H1b: The relationship between overconfidence and risk perception will be stronger for independent entrepreneurs as compared to intrapreneurs. Illusion of control gives an entrepreneur the idea that the future outcomes are under his control, as discussed earlier. In doing so, he overemphasizes the extent to which his personal skills can increase future performance where chance plays a greater role than actual skills (see Langer (1975) for early work on this). The illusion of control, then, brings an entrepreneur to an atmosphere, in which he does not realize how risky the concerning venture is (Simon et al., 1999). In feeling that he controls and predicts outcomes, an individual will evaluate possible hazards in a more favourable light (De Carolis & Saparito, 2006). Additionally, people exhibiting an illusion of control may underestimate risk, because of the fact that they believe their skills are greater than those of others (Simon et al., 1999). Therefore, entrepreneurs exhibiting an illusion of control will underestimate risk, because they believe their skills can prevent negative occurrences (Keh et al., 2002). An example may clear the above theorem. Consider a GSM shop manager who decides to amplify his personnel with employees who speak many foreign languages, so that more phones could be sold to foreign customers. In doing so, the manager thinks that he can increase the shop turnover. This strategy gives the manager the feeling that he controls this situation, not realizing that this decision entails possible risky consequences. Foreign customers may not by definition buy more phones by The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 20
    • Ahmed Bulut talking to an employee who speaks the language of the customer, because it may possible not influence the purchase decision process of the customers. This is an example of an illusion of control of the manager, who does not perceive risks associated with his decision to adopt co-workers with foreign languages skills. As argued above, intrapreneurs will be less susceptible for cognitive biases than entrepreneurs, because of their similarities with managers working in large companies. While Busenitz and Barney (1997) did not study the differences between managers and entrepreneurs with regard to illusion of control, one might expect that there is a difference. Specifically, the study of Busenitz and Barney (1997) could be seen as an early study. By extending their findings, I argue that managers will be less susceptible for illusion of control than entrepreneurs. While independent entrepreneurs, typically, are confronted with information overload, high uncertainty, novel situations, strong emotions, time pressure, and fatigue (Baron, 1998), they will exhibit more cognitive biases than intrapreneurs. This is due to the fact that independent entrepreneurs are actually forced to use cognitive biases, because they are heavily confronted with quick decision making processes without a safe atmosphere, more than do intrapreneurs, because of the absence of a safe organizational setting. Illusion of control, than, is needed to bypass the disorder as confronted by independent entrepreneurs. Furthermore, delay in decision making can lead to negative business and financial consequences, something that may be fatal for independent entrepreneurs, but not for intrapreneurs. Intrapreneurs are actually financial “insured”, because possible failures as made by intrapreneurs are for the account of the intrapreneur’s organization. Independent entrepreneurs, therefore, are more or less forced to feel that their businesses are under their control, more than do intrapreneurs. So, intrapreneurs will exhibit less illusion of control than independent entrepreneurs. In sum, I propose that: H2a: Independent entrepreneurs and intrapreneurs with a stronger illusion of control will perceive less risk. H2b: The relationship between illusion of control and risk perception will be stronger for independent entrepreneurs as compared to intrapreneurs. Early work on the representativeness bias pointed on the risky effects of this bias (e.g. Barnes, 1984; Schwenk, 1984). However, Simon et al. (1999) were the first who explicitly related the representativeness bias to risk perception. They thereby argue that generalizing from a sample entails the big possibility that the sample does not contain negative information. Indeed, it is only possible to gather negative information about an act when one analyzes a full population. Therefore, Simon et al. (1999) argue, when confronted with such a situation, an individual may not perceive the possibility of losses or the full range of possible outcomes. Less risk is perceived than actually exists. The limited amount of information is not the only source of decreased risk perception, because recent success stories or positive outcomes that relate to a situation are also circumstances on which an entrepreneur The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 21
    • Ahmed Bulut may focus (De Carolis & Saparito, 2006). Clearly, representativeness is closely related to risk perception. With respect to the distinction between independent entrepreneurs and intrapreneurs in the case of the representativeness bias, I think that the former are more prone to this bias than the latter. That is, consistent with my earlier held arguments, independent entrepreneurs work for self gain, and are confronted with pressure. Therefore, independent entrepreneurs are forced to make quick decisions, in contrast to intrapreneurs, who work in a safe organizational setting. In making quick decisions, therefore, independent entrepreneurs have to demonstrate a considerable amount as a prerequisite. Generalizing from samples is therefore a necessary task for independent entrepreneurs, in order to make quick decisions. Remember that entrepreneurs exhibit more of this bias than managers (Busenitz & Barney, 1997). Following this, I think that intrapreneurs will show less of the representativeness bias than independent entrepreneurs. More formally, I propose the following: H3a: Independent entrepreneurs and intrapreneurs exhibiting higher representativeness will perceive less risk. H3b: The relationship between representativeness and risk perception will be stronger for independent entrepreneurs as compared to intrapreneurs. The three relationships as discussed above are not quite new. Only the differentiation between independent entrepreneurs and intrapreneurs is added. However, the relationship between the status quo bias and risk perception did not get attention till now. Here, I will argue why these two concepts could be linked to each other. As discussed earlier, the status quo bias means repeating an earlier decision as made by an individual, instead of considering other alternatives. Thus, an individual is inclined to rely on earlier made decisions. Decision makers often face this (Samuelson & Zeckhauser, 1988). Since entrepreneurs are one type of decision makers, it could be expected that entrepreneurs are prone to the status quo bias. However, recent empirical findings reject the proposition that entrepreneurs are more biased than others (Burmeister & Schade, 2007). Nonetheless, previous research suggests that the status quo bias can generate risk tolerance (Barsky et al., 1997).8 Furthermore, in maintaining a status quo, significant timesavings will be realized (Burmeister & Schade, 2007), because remaining a status quo has more advantages than escaping the status quo (Kahneman et al., 1991). Therefore, in rejecting to search for new information for a particular decision making, possible risks can arise that would possibly be discovered in the case when the entrepreneur has been searching for new information. That is, when one repeats an earlier decision, no energy will be invested in analyzing possible other decisions, which 8 Here, risk tolerance was seen as the reciprocal of risk aversion. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 22
    • Ahmed Bulut can be a better solution for a problem than repeating an earlier made decision. In trusting only on these earlier decisions, one might oversee possible risks associated with that decision. This is quite reasonable, because of time pressure, something that entrepreneurs face (Baron, 1998). For the moment, consider the following example. An individual faces a business situation in which he can sell a product below the market price. In doing so, he gets many customers. Simultaneously, he is aware of the fact that he gets less money for his products than his competitors. While he notices that this loss is compensated with the amount of customers generated, this success story will not terminate. When this same individual gets the task in introducing another product for the market, he will be influenced of the past story. Again, he will sell this product for a lower price than the actual market price. However, it is not to say that this decision will be as successful as the previous one, while this is a new situation. Therefore, this person will not realize that he has to do with another situation. As a result, he will not perceive risk associated with his risky decision making behaviour. Other examples can be found in Samuelson and Zeckhauser (1988) and Burmeister and Schade (2007). Consistent with the refinement of the former four hypotheses, I will differentiate here between independent entrepreneurs and intrapreneurs. That is, cognitive biases as possessed by independent entrepreneurs will lead to a stronger decreased risk perception as compared to intrapreneurs, because independent entrepreneurs are more active in uncertain settings than in-company working intrapreneurs. While it is beyond the scope of my thesis, the inclusion of the status quo bias in the comparison study between managers and entrepreneurs (i.e. in Busenitz & Barney, 1997) would have been a better support for my thesis. However, the overall conclusion of that study supports my proposition indirectly, because Busenitz and Barney (1997) make clear that entrepreneurs are more susceptible to cognitive biases than managers. In sum, in suffering from the status quo, independent entrepreneurs and intrapreneurs will perceive less risk, whereby the former will be more prone to it than the latter. Thus: H4a: Independent entrepreneurs and intrapreneurs exhibiting higher status quo bias will perceive less risk. H4b: The relationship between status quo bias and risk perception will be stronger for independent entrepreneurs as compared to intrapreneurs. In the above explained four hypotheses, I have argued how cognitive biases of entrepreneurs comprise a set of antecedents of risk perception, in which I also made a sharp distinction between independent entrepreneurs and intrapreneurs. We can see that cognitive biases of both independent entrepreneurs and intrapreneurs lead to decreased risk perception. What is common in all the four hypotheses above, however, is that the relationships between the four cognitive biases and low risk perception are argued to be stronger for independent entrepreneurs, as opposed to intrapreneurs. From this, it can be drawn The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 23
    • Ahmed Bulut that the most so-called die hards can be found among independent entrepreneurs, rather than among intrapreneurs. In the next subparagraph, I will explain how the generated risk perception by entrepreneurs leads to entrepreneurial behaviour. 2.5.2 Risk perception and Entrepreneurial Orientation What are the possible consequences of perceiving low levels of risk by potential entrepreneurs, in terms of exploiting an entrepreneurial opportunity? This question is the central topic in this sub paragraph. Exploiting entrepreneurial opportunities are risky actions. Early research suggested that venture formation is a consequence of risk propensity (Brockhaus, 1980). Thus, it was argued that entrepreneurs are consciously taking risks. Later studies found that risk propensity does not differentiate entrepreneurs from others and that risk perception explains the exploitation of entrepreneurial opportunities (Palich & Bagby, 1995; Busenitz & Barney, 1997; Norton & Moore, 2006). According to Kahneman and Lovallo (1993), risky actions by decision makers are the result of “bold forecasts”. By suggesting that risk perception encourages a risky behaviour like starting a new venture, recent literature builds forward on this proposition. Also, Sitkin and Weingart (1995) and Weber and Milliman (1997) found that risky decision making behaviour is preceded by a low level of risk perception. Simon et al. (1999) translated these earlier studies on risky decision making for entrepreneurial behaviour. In line with earlier studies, they suggest that perceiving a lower level of risk makes disappearing thresholds associated with an opportunity and therefore may lead to the creation of a new venture. To a great extent, Keh et al. (2002) replicated the study of Simon et al. (1999), using the same arguments. Similarly, Keh et al. (2002) hypothesized that in perceiving lower risks, entrepreneurs perceive a low probability of business failure, with as a result a way of thinking in which these entrepreneurs think that it is feasible and worth considering an entrepreneurial idea. Most recent literature suggests that once an entrepreneur perceives lower risk, he by definition envisions that a smaller chance and level of financial loss is associated with a given situation (De Carolis & Saparito, 2006). Consequently, with these rosy forecasts and lowered perception of possible losses, a potential entrepreneur will be empowered in his or her entrepreneurial orientation. Entrepreneurial Orientation, then, is a very concrete appearance of entrepreneurial behaviour. Indeed, with entrepreneurial orientation we can measure direct behaviour and it is a suitable construct tot study the entrepreneuring individual (Stull, 2005). Thus, I propose: H5: A lower level of risk perception leads to higher levels of entrepreneurial orientation. As discussed earlier, several mechanisms exist to exploit an entrepreneurial opportunity. I thereby argued that distinguishing between independent entrepreneurship and intrapreneurship is an appropriate. This, then, is the newness to be added to existing studies on entrepreneurial behaviour. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 24
    • Ahmed Bulut Below, I will argue to what extent the perception of low risk relates to E.O., whereby I argue that it does matter if the entrepreneuring individual is an independent entrepreneur or an intrapreneur. As argued earlier, there is strong evidence that risky action is preceded by decreased risk perception (e.g. Sitkin & Weingart, 1995; Weber & Milliman, 1997). E.O., then, is an apparent form of risky action. However, intrapreneuring is not for self gain (e.g. Hisrich, 1990), so intrapreneurs carry fewer risks than independent entrepreneurs. Intrapreneurs work in safe organizational settings; possible losses are at the expense of the company, not of the intrapreneuring individual. Intrapreneurs, then, are not heavily mentally pushed to deliver high performance and risky actions, so they would perceive more risk than do independent entrepreneurs. Consequently, intrapreneurs will show lower E.O. than independent entrepreneurs. As argued earlier, independent entrepreneurs are more prone to risky actions, information overload, novel situations and time pressure. Independent entrepreneurs are mentally forced to exploit entrepreneurial opportunities, thus showing higher levels of E.O. They per definition need more lowered risk perception in order to behave entrepreneurially. They work for self gain and are conscious about the fact that they should work hard to earn money. Therefore, independent entrepreneurs would be more biased than intrapreneurs, leading to decreased risk perception and consequently leading to higher E.O. Thus, decreased risk perception of entrepreneurs will lead to higher E.O. With respect to intrapreneurs, this would not as prevalent as compared to independent entrepreneurs. Therefore, I propose: H6: The relationship between decreased risk perception and entrepreneurial orientation is stronger for independent entrepreneurs than for intrapreneurs. The six hypotheses formulated in this chapter correspond to the relationships as depicted in figure 2. High overconfidence (1) – High illusion of control (2) – High representativeness High status quo bias Low risk perception (5) – High Entrepreneurial Orientation (E.O.) (3) – (4) – Cognitive biases Figure 2 – Conceptual model (hypothetical relationships in parentheses). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 25
    • Ahmed Bulut 3. Research method The six hypotheses as formulated in the previous chapter will be tested with the most suitable research method, which I will describe here. Subsequently, the operationalization of the concepts will be performed, in which the hypotheses will be bridged to survey questions. Also, I will describe the methodological approach of construct measurement that will be used (i.e. guarding for reliability and validity). 3.1 Research method In this paragraph, I will explain which research method will be used in order to test the six derived hypothesis as formulated in the former chapter. In describing this, I will mainly make use of methodological entrepreneurship literature. Indeed, excellent relevant studies about methodology exist. Within the field of entrepreneurship, scholars tend to answer two general questions: (1) what are the antecedents or consequences of entrepreneurship? and (2) how does the entrepreneurial process unfold over time? (Van de Ven & Engleman, 2004). In investigating the antecedents of entrepreneurial behaviour, my research fits perfectly in the first categorization. This entails that I have to focus on the variance approach of research, as opposed to a process approach, which is suitable for the second question as asked by entrepreneurship scholars (Van de Ven & Engleman, 2004). Shortly, Van de Ven and Engleman (2004) write the following about the variance approach. In the variance approach, one seeks for explanations of continuous change driven by deterministic causation. Here, independent variables are acting upon and causing dependent variables. Variables are defined and distinguished from each other, both in theory and in the operations used to measure them. Thus, this approach reduces development and change to a sequential list of the results that follow from a deterministic or stochastic model. Variance theories and methods allow scholars to answer “what” questions. Do cognitive biases (the “what”) explain risk perception and does the latter (also a “what”) explain entrepreneurial behaviour (the dependent variable) and is there empirical verification for that? As I am trying to answer “what” questions and also making a sharp distinction between variables to be measured, it logically follows that my research has a quantitative nature. Therefore, quantitative techniques will be used to collect the required data. Therefore, I performed a cross sectional study by carrying out a survey. Design and sampling I argue that a cross sectional study is most suitable to test the six hypotheses, because I will test them among real life independent entrepreneurs and intrapreneurs (as opposed to some former studies with a pure laboratory character). Another reason to perform a cross sectional study lies in the newness of my The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 26
    • Ahmed Bulut conceptual model. Although I derived my conceptual model from existing entrepreneurial models, the content and distinction of exploiting entrepreneurial opportunities (i.e. E.O. by independent entrepreneurs and intrapreneurs) is new. While cross sectional studies are relatively easy to perform, laboratory research methods are more suitable when a cross sectional study empirically confirms the truth of a new theoretical model, because methods like longitudinal studies are time consuming and expensive to perform. Another important reason to perform a cross sectional study to test my conceptual model has to do with previous research about cognitive biases among entrepreneurs. Two empirical publications that formed the core of the theory section of this master thesis (Keh et al., 2002; Simon et al., 1999) were both performed with cross sectional studies. In line with their studies, I will adopt their approach. This makes it easier to compare my research results with previous ones. Since I hypothesize that the magnitude of theoretical relationships in my theoretical model will differ between two major types of entrepreneurs, I approached two groups of entrepreneuring individuals: (1) independent entrepreneurs and (2) intrapreneurs. The primary aim of this thesis is demonstrating that cognitive biases lead to Entrepreneurial Orientation, via lowered risk perception. Thus, I will confront both groups of respondents with identical questionnaires. For the purpose of collecting data, several organizations9 were involved. Most important of them was the Dutch ABN-AMRO, in order to approach intrapreneurs. Other organizations were also contacted in order to approach intrapreneurs. In the form of an interview, I talked to my contact person about the extent of entrepreneurial behaviour of the employees. In doing so, I got insight in the most entrepreneurial departments and employees within the organization. After that, I sent a mailing (with an internet link) to my contact person, who sent it through to the most entrepreneurial employees. Three methods were used to approach independent entrepreneurs. First, members of VNO-NCW in the centre region of The Netherlands got an online newsletter from VNO-NCW. In that newsletter, attention was given to my research. Second, I posted comments on internet forums (Hyves and Zibb). Third, I visited several business centres in Amsterdam, where I handed over promo flyers with the internet address of my online questionnaire. The questionnaire was open from 3 June 2008 till 18 July 2008. Before the final deadline, a reminder was sent to subjects. Since I could not exactly control how many intrapreneurs were invited to fill in the questionnaire, no indication can be given about the size of approached intrapreneurs. With respect to independent entrepreneurs, it is even more difficult to say something about how many of them were informed about my questionnaire. 9 See appendix 1 for more information about involved parties. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 27
    • Ahmed Bulut As argued in chapter 2, in intrapreneurship to be happening, one must be in the pay of the organization, with a minimum employee magnitude of 50. All of the involved organizations have a minimum employee base of 50. In filling in the questionnaire, respondents were asked to indicate whether or not they are in the pay of an organization (the other option is selecting the independent entrepreneur alternative). As argued in chapter 2, to call someone an independent entrepreneur, one must own an organization. The independent entrepreneur alternative logically discerns intrapreneurs from independent entrepreneurs. The sampling technique used to collect data is nonprobability sampling, specifically clustering. In fact, entrepreneurs in Holland were divided in two clusters (i.e. independent entrepreneurs and intrapreneurs). With respect to independent entrepreneurs, only small and middle sized companies were approached. According to MKB,10 small companies have at least 10 and at most 49 employees, whereas middle sized companies have between 50 and 250 employees. The small and middle sizes companies comprise 99,7 percent of the total companies in Holland (MKB, 2008). Micro and large corporations were not included in the sample. With respect to intrapreneurs, only few organizations were included in the sample. The last topic with regard to sampling is the desired response size. As a rule of thumb under scholars, the minimum response size per used independent variable is 15. My conceptual model contains four independent variables. For both independent entrepreneurs and intrapreneur groups, then, a minimum response of 60 is a logical requisite. Data collection technique In carrying out this study, I used an online survey tool to collect the required data. This tool, named ThesisTools,11 is a survey tool, used by all types of online research. In using this, no paper questionnaires were used, yielding an orderly set of data, which were entered in SPSS to analyze the data. Only one version of the internet survey was used, which was filled in by both intrapreneurs and independent entrepreneurs. These intrapreneurs and independent entrepreneurs comprise also the units of analysis. 10 This is the Small and Medium Enterprises (SME) organization in The Netherlands. 11 See also www.thesistools.com. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 28
    • Ahmed Bulut 3.2 Research biases, reliability and validity In this paragraph, I will describe methods that were used in order to guarantee reliable and valid survey results. But first, I will describe which research biases can be expected and how I will handle with it. Guarding for research biases Three types of research biases that may arise are (1) selection bias, (2) non response bias and (3) common method bias. In selecting observations that are dependent on an outcome variable, this selection may lead to biased inference about social processes (Winship & Mare, 1992). In my research, this bias is present. Specifically, all the study variables are measured simultaneously, containing pre selected variables. Several solutions to this problem exist; one of them is using variety of methods (Winship & Mare, 1992). Thus, ideally, cognitive biases among random people should be measured first. After a certain period, E.O. should be measured among the same persons with a focus on entrepreneurs. A suitable solution to lower this bias is performing longitudinal studies and comparing those studies with cross sectional studies. This, then, is a future avenue in entrepreneurial research. Nonresponse bias may exist when the results of a survey are not adequately reflected, because of non response. Specifically, non respondents would have filled in questionnaires different than those who did. To test whether or not this bias exist, an extrapolation of the data as suggested by Armstrong and Overton (1977) can be performed. Early respondents can be compared with late respondents (i.e. with a t-test) to check whether a difference exists between early and late respondents. The rationale behind this principle is that late respondents are more like non respondents. Unfortunately, as involved organizations did not participate in my research simultaneously, this bias cannot be checked. Common method bias, then, stems from common method variance that is attributable to the measurement method rather than to the constructs the measures represent (Podsakoff et al., 2003). These authors provide handy solutions to eliminate common method bias. Most important of them, I will separate the measurement of the independent and dependent variables psychologically and guarantying response anonymity. In the questionnaire, the questions were not categorized in the same order as my theoretical model and the type of questions (i.e. Likert-scale, open ended and multiple choice) were disorderly categorized to lower the common method bias. However, there is still a single method used in collecting data, which may prevent full generalization of research results. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 29
    • Ahmed Bulut Reliability Shortly, reliability means that repeating a research will result in the same outcomes. Since I am performing a single study, it is not possible to replicate my research in the short run. To overcome this problem, I will randomly divide the received data in two parts and I will compare those parts to see whether there are significant differences between those parts. Additionally, I will perform a reliability analysis in SPSS to check whether questions are answered consistently by the respondents. As a general statistical rule, the minimum α will be kept at ,70. Items that lower the Cronbach’s alpha far below the ,70 level will be eliminated from further analysis. Validity Ideally, the best research results are those ones in which scholars measure that which they intended to measure. Valid results are very important, because it refers to the degree to which a researcher can draw appropriate inferences from empirical research results (Bouckenooghe et al., 2007). In practice, no study could be 100 percent valid. According to Bouckenooghe et al. (2007), there is a common agreement within the social sciences that overall confidence in empirical findings is a function of four facets of validity, which where first espoused by Cook and Campbell (1984). Those are (1) internal validity, (2) external validity, (3) construct validity and (4) statistical conclusion validity (e.g. Bouckenooghe et al., 2007). I will adopt these prescriptive elements in this thesis. First, internal validity refers to the correctness of inferences about causal (theoretical) connections between focal constructs (ibid.). Thus, sound and logical descriptions of relationships between constructs are needed. Indeed, in the second chapter, I accomplished a theoretical picture as good as possible, based on existing and new insights within the field of entrepreneurship. Therefore, internal invalidity is not a threat here. Second, external validity refers to the correctness of inferences about the generalisability of a study’s results across populations of settings, subjects or time periods (ibid.). To make generalisations (to a certain extent) possible, I approached intrapreneurs at several companies. Also, I approached varied independent entrepreneurs, independent of their branch or residence. However, a full generalisation is not possible in this thesis due to the absence of nonresponse measurement and using a single method. Third, construct validity refers to the degree of correspondence between constructs and its operational definitions (ibid.). Thus, if a researcher performs the operationalization of constructs not corresponding to the used definitions, construct invalidity may threaten the validity of the research results. To overcome this potential problem, I accurately linked the definition of constructs (see chapter 1 and 2) to the operationalization of existing studies (see next paragraph). Also, I presented my conceptual model (including theoretical explanations) to two researchers at the VU University and to a business development manager at ABN AMRO. This check did not result in adaptation of the theory. As an additional procedure to guide for construct invalidity, I performed a confirmatory factor analysis. Fourth, statistical conclusion validity deals with the correctness of The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 30
    • Ahmed Bulut statistics based conclusions about the extent to which variables are related to each other (ibid.). To overcome this, I strived for an acceptable sample size. In the next section, relationships between variables will be only considered as significant when the confidence interval is deployed at 95 percent (i.e. a maximum of 5 percent tolerance level for significance). 3.3 Pre-test Before the online survey was open to subjects, I tested the survey among several employees of ABN AMRO, two researchers at the VU University and two MSc students. This pre-test resulted in minimal adaptations. An initial 10-item question measuring representativeness was shortened to six items, because it seemed that asking too many questions could tire out respondents. Furthermore, the initial four questions measuring status quo bias was increased with one question. All of the pre-test subjects indicated that the questions were clear enough understand. The questionnaire was translated to Dutch, and checked by my supervisor before the questionnaire was made public. The questionnaire in appendix 3 contains the final Dutch questionnaire. 3.4 Operationalization In this paragraph, I operationalize the constructs as introduced in the first chapter that I elaborated further in the second chapter. I will operationalize the dependent variables first, followed by the independent variables and the mediating variable. After that, I will focus on the control variables that should be held constant in analyzing the collected data. This led to the questionnaire, as included in the appendix. 3.4.1 Entrepreneurial Orientation (E.O.) E.O. is a widely used tool in order to measure entrepreneurial activities (e.g. Lumpkin & Dess, 1996; Stull, 2005). These scholars conceptualize E.O. as a multidimensional construct, comprised of three dimensions: (1) risk taking, (2) innovativeness and (3) pro activeness. Risk taking is conceptualized as venturing into the unknown, innovativeness means engaging in activities that result in new ideas which may result in new products, services and processes, whereas pro activeness is conceptualized as acting in anticipation of future needs and challenges that can lead to new opportunities (Stull, 2005). Despite there is a debate about the unidimensionality of the E.O. construct (Covin et al., 2006), it makes sense to use the three dimensions in this study, because E.O. is the dependent variable in this thesis. In this thesis, then, E.O. was measured using the 15-item five point Likert-scale as proposed by Stull (2005). In this thesis, E.O. not only refers to entrepreneurial behaviour of intrapreneurs, but also to the same behaviour of independent entrepreneurs. Ultimately, the intrapreneurs and independent entrepreneurs could be easily compared to each other, regarding their entrepreneurial behaviour. Two items were reverse coded (i.e. item 1 and 3). The inter reliability of this construct was high in Stull’s study ( α =,76). In appendix 2, the questionnaire can be found. E.O. questions can be found in part 2, The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 31
    • Ahmed Bulut whereby the first five questions refer to risk taking, the next five questions to pro activeness, and the last five questions to innovativeness. In this master thesis, factor analysis confirmed the existence of three E.O. dimensions. Altogether, the inter reliability of these 15 items are high ( α =,89). 3.4.2 Overconfidence I adopted the format used by Keh et al. (2002) and Simon et al. (1999). In both studies they based their operationalization on the definition of Russo and Shoemaker (1992), which I also used as a basis in the theory section. To measure overconfidence, I used six questions with the same format as in previous studies. However, I adapted on the Holland context, because former studies took Singapore (Keh et al., 2002) and the United States (Simon et al., 1999) as a starting point. Each question in the questionnaire (see part 3 of appendix 2) has only one correct numerical answer. Subjects were asked to build a confidence interval that they were 90 percent sure would capture the right answer. For each correct answer that fell outside the range was scored as one, rather than zero. The overall overconfidence, than, was obtained by the summation of these scores (i.e. with a maximum of 6). Consistent with former studies, subjects were asked about general and not specific knowledge, because entrepreneurs draw upon a wide array of information in evaluating new venture ideas (Simon et al., 1999; Keh et al., 2002). Therefore, respondents had to fill in ranges instead of giving punctual correct answers. Here is an example of an item: what is the total population of Holland in 2007? The correct answer on this 16.4 million, but the respondent should give the lower and upper limit of the answer, in which he or she is sure that these range encompass the correct answer. If a respondent states a lower limit of 15 million and an upper limit of 17 million, than this respondent is not overconfident, because the correct answer falls into the range as given by the respondent. Only if the given interval does not encompass the right answer is reason to mark the respondent as overconfident for that question. 3.4.3 Illusion of control The illusion of control is measured by using three items (see part 3 of appendix 2), which is adopted from Keh et al. (2002) and Simon et al. (1999). The first two items measured the respondents’ perception of their own ability to predict uncontrollable outcomes, whereas the third item measured the perception of the respondents’ believe that their skills were better than those of others. Keh et al. (2002) report an acceptable internal consistency of this variable ( α =,80), whereas in the Simon et al. (1999) study, the reported Cronbach’s alpha is somewhat lower ( α =,67). In this master thesis, the Cronbach’s alpha is acceptable ( α =,83). Also, factor analysis confirms the unidimensionality of the three items. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 32
    • Ahmed Bulut 3.4.4 Representativeness In line with Busenitz and Barney (1997), Keh et al. (2002) and Simon et al. (1999), a short case was presented to respondents. In this short business case, an entrepreneurial opportunity was presented, including some statistical information about the business (see the second half of part 3 of appendix 2, i.e. open ended question). Many researchers recommend using a character name in those kinds of case studies (Keh et al., 2002), so I used a typical Dutch name in this case study (i.e. Karel Jansen). Subjects were asked to report three pieces of evidence from the case that influenced their decision of whether to start the venture. The explanations were content analyzed and coded independently, in line with former studies. A code of 1 was given for explanations containing representativeness, i.e. for responses that did not contain statistical reasoning, but subjective opinions or rules of thumb (e.g. the opinions of a few potential customers). A code of -1 was given for responses that contained a form of statistical reasoning, including references to sample size (e.g. the respondent relied on larger samples) and the importance of market research. Responses that remained were coded as zero. To form a continuous variable, the codes were summed to give a single value for the representativeness variable, allowing values ranging from negative 3 to positive 3. 3.4.5 Status quo bias I used the works of two important studies regarding the status quo in decision making (i.e. Samuelson & Zeckhauser, 1988; Burmeister & Schade, 2007). Both these studies dealt with the status quo bias in decision making. In their experimental survey, they requested subjects to move themselves in a few particular business situations (e.g. six scenarios in the study of Burmeister & Schade, 2007). Then, four alternatives were given, in which one represents the status quo bias. As an example, consider a person who lost his digital photo camera. The subject has to buy a new camera, with three options. One option is buying the same one as the subject had before (i.e. biased in status quo) or buying a cheaper one that he was not used to be use. In choosing this alternative, it is to conclude that the subject is not biased in his or her status quo for that item. Because full replicating these studies result in a too long questionnaire, I used five scenarios in this thesis.12 Former studies used three versions of the same scenario (i.e. neutral version, status quo version and non status quo version), in order to test several treatments. However, I used only the status quo version, in order to guard for brevity of the questionnaire. Therefore, I used five items as used earlier by Burmeister and Schade (2007). See part 6 of appendix 2 for the four items. The first three items are adopted from Burmeister and Schade (2007) and the fourth item is adopted from Samuelson and Zeckhauser (1988), but I adapted it a little to the ‘today’ situation. I devised the fifth item, but it is 12 Indeed, entrepreneurs might not be willing to take lot of time to read and respond to long cases (Keh et al., 2002). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 33
    • Ahmed Bulut in line with the other four questions. In each item, the first alternative refers to the status quo. Respondents choosing this alternative get a 1. For the whole variable, respondents can get a maximum score of 5, indicating that this person is very biased in his or her status quo. 3.4.6 Risk perception As discussed earlier, I will not measure risk perception per se. Rather, risk perception related to business situations is relevant here. Thus, perceived risk in the venture is used, exactly in line with Keh et al. (2002). They used four items to measure this risk perception, immediately after a short business situation was presented, which was also used to measure the degree of representativeness. Therefore, the representativeness bias and risk perception are measured using the same case (see part 5 of appendix 2). The inter reliability of this construct was high ( α =,89) in the study of Keh et al. (2002). In this thesis, the inter reliability is acceptable ( α =,77) and factor analysis shows that risk perception is as single construct. 3.4.7 General background and controls Beside the required items, I also asked respondents to fill in some basis information about themselves (included in part 1 of appendix 2). Additionally, risk propensity was used as a control variable, in order to hold constant the tolerance for risk. Five items were included, adopted from Keh et al. (2002). They used the operationalization of Forlani and Mullins (2000), which dealt with personal propensities towards financial risk taking, as opposed to other kinds of risk taking. According to Keh et al. (2002), measuring risk taking in everyday life situations might not be effective among entrepreneurs, because entrepreneurs face other (i.e. financial) risk situations. This argument also fits in this paper. In all the five items, subjects were asked to choose between two options. The first was getting a vast amount of money for sure and the second option was getting a higher value for a given percentage. For example, a respondent who opt an 80 percent chance of getting 5.000 euro above getting 4.000 euro for sure thus tolerates risk, and is therefore inclined to accept risk. Subjects get one point for every item in which the percentage option is chosen, or a zero for the vast amount option. The maximum score on this variable is 5, indicating that the subject deals with a high level of risk propensity. The items are included in part 1 of appendix 2. The last part of the questionnaire was an optional possibility for subjects to express comments regarding the questionnaire (i.e. part 7 of appendix 2). The questionnaire was reported in Dutch. The Dutch translation of the questionnaire is included in appendix 3. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 34
    • Ahmed Bulut 3.5 Handling procedure In this paragraph, I will describe the token steps regarding the received data. For order, extra schemes are included in appendix 4 instead of in this chapter. 3.5.1 General procedure The arrived data on ThesisTools was first analyzed in order to check for redundant data. The initial response on my questionnaire was 143. Partially filled in questionnaires, non-entrepreneurs and entrepreneurs not falling in the category of SME size were removed. This resulted in a net response of 115. Specifically, 72 of them were intrapreneurs and 43 of them were independent entrepreneurs. The vast majority of the respondents (71,3%) consist of male. Furthermore, the vast majority of the respondents have an academic or high school degree (76,5%). Most respondents (n=72) are intrapreneurs, as opposed to independent entrepreneurs (n=43). The majority of the respondents (38,3%) have worked for at least five years at their current business. The average age of the respondents is 34. 3.5.2 Handling of the data The received data was transmitted to an SPSS file. I will discuss the procedure here. Occasionally, respondents did not answer all the questions. Therefore, empty records were coded with 99, with no consequence for missing values. With respect to risk propensity (i.e. control variable, 5 items), the scores were summed beside the original 5 items in order to get the amount of risk propensity per respondent (0 is very risk averse, 5 means many tolerance of risk). With respect to E.O., beside the 15-item variable, a variable is added, containing the average E.O. of the respondent. This average was calculated after the factor analysis, as indicated below. Analysis was done after recoding two items. The six questions regarding overconfidence were analyzed by coding items with a 0 (when the given interval contains the correct answer) or with a 1 (when the given interval does not capture the right answer). After that, the scores were summed to determine the level of overconfidence. Since the variable contains six items, the maximum score for overconfidence is six. Three items measuring illusion of control were moved to SPSS directly. A new variable is made with the average level of this construct. Of course, this is done after the factor analysis. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 35
    • Ahmed Bulut For calculating the representativeness scores, respondents’ answers were content analyzed and a final score was computed to enter in SPSS, ranging from -3 to +3. With respect to the status quo bias, the status quo alternatives of the five items were summed to determine the final score of that variable (i.e. a maximum of 5). Four items measuring risk perception were moved to SPSS directly. A new variable was created in order to compute the average level of risk perception (after the factor analysis). 3.5.3 Checking for biases I randomly divided the data in two parts and performed a t-test for all the six variables of my theoretical model. In doing this, no significant differences were detected, indicating that reliability is not a problem. Details of the comparison are included in appendix 4. 3.6 Factor analysis and reliability analysis In this paragraph, I will present several statistical techniques to analyse the data more extensively. 3.6.1 Confirmatory factor analysis A factor analysis was performed in order to check to what extent the used items load on the same component. This will be done for variables that were measured by using a Likert-scale, including (1) illusion of control, (2) risk perception and (3) E.O. In doing so, it can be determined whether these three constructs are distinguishable from each other. For factor analysis to perform, the principal components analysis is chosen with varimax rotation. Missing values are replaced with means, because the sample of my research is relatively small and excluding cases lowers the n and wastes the data. In table 1a, the eigenvalues and factor loadings are presented. Five out of 22 components explain 65,7 percent of the total variance of the above mentioned three variables. Only these five components are pictured. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 36
    • Ahmed Bulut Comp. Initial eigenvalues % of Cumulati variance Rotation sums of squared loadings Total Extraction sums of squared loadings Total ve % % of Cumulati variance Total ve % % of Cumulati variance ve % 1 8,202 37,284 37,284 8,202 37,284 37,284 3,437 15,621 15,621 2 2,241 10,188 47,472 2,241 10,188 47,472 3,408 15,490 31,112 3 1,773 8,059 55,531 1,773 8,059 55,531 2,902 13,189 44,301 4 1,221 5,549 61,080 1,221 5,549 61,080 2,370 10,770 55,071 5 1,007 4,577 65,657 1,007 4,577 65,657 2,329 10,585 65,657 Table 1a – Factor analysis: eigenvalues and factor loadings. Based on the three Likert-scale variables analyzed, we could expect six components. As discussed, E.O. comprises and is measured with three dimensions, risk perception with one dimension and illusion of control with two dimensions. However, on the base of the gathered data, five components are extracted. Table 1b gives insight in these five components. Item Component 1 2 3 4 Illusion of control 1 ,797 Illusion of control 2 ,769 Illusion of control 3 5 ,847 Risk perception 1 -,586 Risk perception 2 -,583 Risk perception 3 -,409 Risk perception 4 -,635 E.O. 1 ,776 E.O. 2 ,741 E.O. 3 ,844 E.O. 4 ,717 E.O. 5 ,611 E.O. 6 ,697 E.O. 7 ,614 E.O. 8 ,809 E.O. 9 ,640 E.O. 10 ,732 E.O. 11 ,726 E.O. 13 ,695 E.O. 14 ,744 E.O. 15 ,465 ,634 E.O. 12 ,466 ,789 Table 1b – Factor analysis: rotated factor matrix (coefficients < ,40 omitted). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 37
    • Ahmed Bulut The factor analysis shows that illusion of control is most probably a single construct with high item loadings on a single factor. Thus, while two dimensions (i.e. 1 and 2 on the one hand, and 3 on the other) were used to measure this construct, the internal coefficients are very high. In next analyses, the mean of these three items will be used. And as expected, all four dimensions measuring risk perception load on one component, indicating that the four items measuring risk perception belong together. The mean of these four items will be used in further analyses. Entrepreneurial Orientation gives a slightly different picture about the construct. The factor matrix makes clear that E.O. captures three dimensions, as described in the methods section. The first five, the next five and the last five items clearly pertain to each other. The 7th and 9th items are debatable, because beside their heavy internal relationships, they also load on the risk perception component. However, these items are more strongly connected to component 3, at which the other three items also load. Therefore, these two items do not provoke concern. I theorized about three dimensions of E.O. and the factor analysis confirms the existence of three dimensions of E.O. That is, the first set of E.O. (i.e. E.O. 1 till E.O. 5) refers to risk taking, whereas the second set of E.O. (i.e. E.O. 6 till E.O. 10) refers to innovativeness. The third set, then (i.e. E.O. 11 till E.O. 15), refers to pro activeness.13 In sum, it can be said that three constructs measured with Likert-scale technique are seemed to be distinguishable from each other. It is sure that tautology does not exist between these constructs. 3.6.2 Reliability analysis The internal consistency of the three constructs analyzed with factor analysis are tested on their inter reliability. I thereby used the Cronbach’s alpha standards, in which a minimum level of ,70 is generally seen as a minimum requisite in order to speak about reliable construct measurement. Table 2 displays α ’s per construct. The inter reliability of the constructs are of acceptable levels, so no item will be removed. Note that there is a debate among some scholars about the unidimensionality of the E.O. construct (Covin et al., 2006), but in line with Stull (2005), it seems that there is internal coherence among the three dimensions of E.O., with a very acceptable α of ,89. Variable α Illusion of control ,83 (n=108) Risk perception ,77 (n=109) E.O. ,89 (n=115) Table 2 – Reliability analysis. 13 While the factor analysis comprises three distinguishable components for the E.O. construct, factor analysis cannot tell us whether or not E.O. is a single construct. That is, there is a theoretical discussion about this (e.g. Covin et al., 2006). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 38
    • Ahmed Bulut 4. Results I will execute a correlation and regression analysis in order to check to what extent my model corresponds to reality. Finally, the revised model will be extracted on the basis of these results. 4.1 Descriptives Table 3 presents the means, standard deviations and inter-correlations among the study variables. Pearson correlations are computed, missing values are pairwise excluded. Although most variables show sufficient variance, three do not (i.e. low standard deviation). That is, the three Likert-scale variables (illusion of control, risk perception and E.O.) have a relatively low range of variation in the data set. Especially, with ,44 the standard deviation of E.O. is too low. This may bias correlations with other variables. However, the type of respondents may clarify this. That is, people involved in entrepreneurial activities were selected for this thesis (i.e. independent entrepreneurs and intrapreneurs), from which we can expect high levels of entrepreneurial orientation. Therefore, it is not to say that this is a matter of selection bias, because entrepreneurs comprise the unit of analysis. It seems that a high X and a low σ −1 is quite normal here, because a recent study among North American intrapreneurs (Stull, 2005) showed similar results ( X =3,96; σ −1 =,46) for the E.O. construct. Looking at inter-correlations of study variables, cognitive biases appear to be significantly related to risk perception and E.O., status quo bias excepted. Risk perception is strongly related to E.O. (r=,81). This indicates initial support for hypotheses 1, 2, 3 and 5. In the context of this thesis, status quo bias seems to be an orthogonal variable, since no variable is significantly related with it. What’s more, entrepreneur type seems to be matter. All the study variables, except for status quo bias, are significantly related to entrepreneur type. Thus, independent entrepreneurs are more prone to overconfidence, illusion of control and representativeness biases than intrapreneurs. They also significantly perceive fewer risks and exhibit more entrepreneurial orientation than intrapreneurs. A serious issue in many social science researches is multicollinearity, in which independent variables strongly (r>,80) affect each other. The highest correlation between predictors here is between overconfidence representativeness (r=,57), which does not suspect multicollinearity to exist at first glance. However, in the next paragraph the VIF factors will be computed in order to obtain certainty about this issue. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 39
    • Ahmed Bulut X σ −1 n 1. Intra (0)/ind. ent. (1) ,37 ,49 115 2. Risk propensity 2,15 1,31 115 ,08 3. Overconfidence 3,82 1,05 109 ,54*** -,07 4. Illusion of control 3,57 ,66 108 ,56*** ,15 ,48*** 5. Representativeness ,76 1,62 106 ,56*** -,05 ,57*** ,40*** 6. Status quo bias 3,00 1,06 110 ,14 ,07 ,14 -,07 ,05 7. Risk perception 2,28 ,51 109 -,52*** -,01 -,62*** -,59*** -,58*** -,02 8. E.O. 3,86 ,44 115 ,51*** -,06 ,62*** ,54*** ,60*** ,01 1 2 3 4 5 6 7 -,81*** Table 3 – Means, standard deviations and inter-correlations (*** p<,001). 4.2 Hypotheses test Tables 4 and 5 contain the results of regression models used to test the six hypotheses explored in chapter 2. Because there exist sound theoretical relationships between the used constructs, the forced entry method is performed in the multivariate analysis. To prevent data loss, missing values are replaced with mean. Reported coefficients are standardized β ’s. The multivariate analysis is presented in table 4, containing coefficients of the whole data set (i.e. including both intrapreneurs and independent entrepreneurs). Looking at model 1, overconfidence, illusion of control and representativeness have strongly negative and significant effect on risk perception, supporting hypotheses 1a, 2a and 3a. Status quo bias has no causal effect on risk perception, thus hypothesis 4a is rejected. Model 3 tests hypothesis 5. As hypothesized, a decreased level of risk perception leads to high levels of E.O. ( β =,80, p<,001). Hypothesis 5 is fully supported. However, since the conceptual model of this thesis contains a mediating variable (i.e. risk perception), two models (2 and 4 in table 4) are added to verify the existence of mediation, whereby I used the method of Baron and Kenny (1986). In their seminal study, Baron and Kenny (1986) propose that for mediation to occur, three conditions should be met: (1) independent variables have significantly effect on the presumed mediator, (2) the mediator significantly affects the dependent variable and (3) controlling for the mediator takes away the causal relationship between the independent variables and the dependent variable. Applying the first criterion, model 1 demonstrated the existence of causal and significant negative relationship between three cognitive biases and risk perception. Second, model 3 demonstrates the existence of causal relationship between the mediator (risk perception) and the dependent variable (E.O.). Thus, both the first and second criteria are met. With respect to the third criterion, model 2 demonstrates that three cognitive biases (overconfidence, illusion of control and representativeness) significantly affect E.O. Again, status quo bias has a marginal role here. Including risk perception to this analysis (i.e. model 4) disappears the initial significant relationships between three cognitive biases and E.O. Here, The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 40
    • Ahmed Bulut risk perception is accountable for variation in E.O. ( β =-,59, p<,001). Thus, the third criterion is also met. In summary, in following the mediation criteria as formulated by Baron and Kenny (1986), I conclude that risk perception fully mediates the causal relationships between cognitive biases and E.O. Model 1: risk Model 2: E.O. Model 3: E.O. Model 4: E.O. perception Coefficient t Coefficient t Coefficient t Coefficient t Risk propensity -,00 -,08 -,06 -,87 -,07 -1,19 -,07 -1,16 Overconfidence -,30** -3,46 ,31*** 3,64 ,13 1,83 Illusion of control -,28** -3,45 ,28** 3,47 ,11 1,63 Representativeness -,29** -3,54 ,30*** 3,80 ,13 1,95 Status quo bias ,02 ,30 -,03 -,42 -,02 -,30 -,59*** -7,94 Risk perception F-statistic -,80*** -13,99 19,70*** R 2 Adjusted R 21,62*** 98,36*** 38,75*** ,48 2 ,50 ,64 ,68 ,45 ,48 ,63 ,67 Table 4 – Multivariate analysis (**p<,01; ***p<,001). The next analysis further tests the hypotheses as formulated in chapter 2. Remember that for each hypothesis formulated, distinction was made between intrapreneurs and independent entrepreneurs. I proposed that each relationship would be stronger for independent entrepreneurs as compared to intrapreneurs. Five additional models are constructed to verify this, all included in table 5. The first model in table 5 tests the causal relationship between overconfidence and risk perception. The relationship between these variables is stronger for independent entrepreneurs ( β =-,64, p<,001) than for intrapreneurs ( β =-,45, p<,001), supporting hypothesis 1b. Model 2 depicts the causal relationship between illusion of control and risk perception. Again, this relationship is stronger for independent entrepreneurs ( β =--,63, p<,001) as compared to intrapreneurs ( β =-,36, p<,01). Thus, hypothesis 2b is supported. In model 3, we can see that representativeness has a strong effect on risk perception regarding intrapreneurs ( β =-,39, p<,01), but this relationship is stronger when we look at independent entrepreneurs ( β =-,53, p<,001). Hypothesis 3b is also supported. Model 4, then, depicts the relationship between status quo bias and risk perception. For both intrapreneurs and independent entrepreneurs, we can observe that no relationship exists. Therefore, hypothesis 4b is rejected. In model 5, the causal relationship between risk perception and E.O. is presented. For independent entrepreneurs, this causal relationship is stronger ( β =-,81, p<,001) when we compare this with intrapreneurs ( β =-,73, p<,001). Accordingly, hypothesis 6 is supported. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 41
    • Ahmed Bulut Model 1: risk Model 2: risk Model 3: risk Model 4: risk perception perception perception perception Coefficient t Coefficient t Coefficient t Coefficient t Risk propensity -,04 -,33 ,11 ,92 ,00 ,03 ,04 ,36 Overconfidence -,45*** -4,10 -,36** -3,12 -,39** -3,49 ,01 ,11 Intrapreneurs Illusion of control Representativeness Status quo bias F-statistic 8,47** R 2 Adjusted R 4,96* 6,16** ,07 ,20 2 ,13 ,15 ,00 ,17 ,10 ,13 -,03 Ind. entrepreneurs Risk propensity ,03 ,25 Overconfidence -,64*** -5,25 ,07 -,63*** -5,11 ,00 -3,90 Status quo bias F-statistic ,04 ,23 ,27 Representativeness ,00 -,53*** Illusion of control ,01 1,81 13,85*** R 2 Adjusted R 13,13*** 7,65** 1,67 ,41 2 ,40 ,28 ,08 ,38 ,37 ,24 ,03 Table 5 – Univariate analysis (*p<,05; **p<,01; ***p<,001). Model 5: E.O. Coefficient t Risk propensity -,11 -1,35 Risk perception -,73*** -9,07 F-statistic 42,63*** Intrapreneurs 2 R ,55 2 Adjusted R ,54 Ind. entrepreneurs Risk propensity ,05 ,55 Risk perception -,81*** -8,83 F-statistic 39,04*** 2 R ,66 2 Adjusted R ,64 Table 5 (continued) – Univariate analysis (***p<,001). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 42
    • Ahmed Bulut An additional t-test was performed to check whether independent entrepreneurs and intrapreneurs differ in their extent of overconfidence (hypothesis 1b), illusion of control (hypothesis 2b), representativeness (hypothesis 3b), status quo bias (hypothesis 4b) and E.O. (hypothesis 6). It seems that the differences between the two types of entrepreneurs are significant, with the exception of hypothesis 4b, whereby no difference exist in the status quo level. The t-test table is included in appendix 4. In the former paragraph, we observed that most probably, no multicollinearity exists among independent variables. Two techniques can be used to compute this, named VIF and tolerance (Lin, 2008). As a rule of thumb, VIF greater than 10 indicates the presence of multicollinearity. Tolerance is the reciprocal of VIF, ranging between 0 and 1 (ibid.). Tolerance close to 0 indicates the presence of multicollinearity, e.g. values than 0,1 (ibid.). In applying these rules, we do not observe multicollinearity in the multivariate analysis. The highest VIF factor observed is 1,90, indicating that multicollinearity does not exist among the variables studied here. By the same token, the lowest tolerance level observed is ,53. This also indicates no multicollinearity to exist. In the appendix, a table is enclosed with VIF and tolerance factors of multivariate analysis variables. To summarize the results section of this thesis, I systematically analyzed the data gathered to test the six hypotheses as formulated in chapter 2 by carrying out descriptive and inferential statistics analyses. Of the four hypotheses proposing negative causal relationship between four cognitive biases and risk perception, three are fully supported (i.e. hypotheses 1, 2 and 3), whereas one is fully rejected (i.e. hypothesis 4). Two hypotheses proposing negative causal relationship between risk perception and E.O. are fully supported (i.e. hypotheses 5 and 6). In the next chapter, the meaning of these results will be discussed. Figure 3 depicts the revised conceptual framework (cf. figure 2 in chapter 2), which is induced on the basis of empirical material. High overconfidence (1) – High illusion of control (2) – High representativeness (3) – Low risk perception (5) – High Entrepreneurial Orientation (E.O.) Cognitive biases Figure 3 – Revised conceptual model. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 43
    • Ahmed Bulut 5. Discussion In this chapter, I will discuss the findings as analyzed in the former chapter. This will be done in the light of the theory. Subsequently, theoretical and practical implications will be presented. 5.1 Findings This master thesis looks at cognitive biases of entrepreneurs. Specifically, I hypothesized that four cognitive biases should affect risk perception. This, in turn, was hypothesized very important in explaining entrepreneurial orientation. It was found that the more overconfident an entrepreneuring individual is, the less risk associated with a business opportunity this person perceives. This is true for entrepreneuring individuals operating in an existing company (i.e. intrapreneurs), but even more true for entrepreneurs owning a company (i.e. independent entrepreneurs). It was also found that proneness to the illusion of control has as consequence that an entrepreneuring individual perceives too less risk associated with an entrepreneurial opportunity. Independent entrepreneurs are more prone to it than intrapreneurs. Also, I found that entrepreneurs who fall in the fallacy of representativeness are blind to risks linked with an entrepreneuring opportunity. Specifically, independent entrepreneurs are more prone to this situation than intrapreneurs. Furthermore, it was found that predisposition to the status quo bias of entrepreneurs has no effect on the level of risks perceived with a business opportunity: neither for intrapreneurs, nor for independent entrepreneurs. Thus, three out of four discussed cognitive biases have a negative effect on risk perception. Perceived risk perception seemed to affect the level of entrepreneurial behaviour. Specifically, it was found that perceiving lower level of risk results in a higher level of entrepreneurial orientation. It is proven that this effect is strong under intrapreneurs, but stronger for independent entrepreneurs. The above mentioned results also imply the existence of a mediation effect of risk perception. Cognitive biases affect entrepreneurial behaviour at first glance. Thus, overconfidence, illusion of control and representativeness affect entrepreneurial orientation. However, there is empirical evidence in this thesis that variance in entrepreneurial orientation is mainly explained by risk perception. Thus, the three cognitive biases first affect risk perception (negatively) and this in turn affects entrepreneurial orientation (negatively). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 44
    • Ahmed Bulut 5.2 Theoretical implications In this paragraph, my research findings will be bridged to previous research about entrepreneurship. I will also describe the contribution of my research to the field of entrepreneurship. Finally, a research agenda will be presented. In this master thesis, I proposed that overconfidence, illusion of control, representativeness and status quo bias will lead to decreased risk perception and that independent entrepreneurs will be more prone to this than intrapreneurs. Second, I proposed that decreased level of risk perception will lead to high level of entrepreneurial orientation, in which also independent entrepreneurs will be more amenable to it than intrapreneurs. All of this was confirmed empirically, with the exception of the status quo bias: this construct seemed to be irrelevant in the context of cognitive biases and entrepreneurial behaviour. In my knowledge, this master thesis first confirms the importance of entrepreneurial orientation in the context of entrepreneurial cognitive biases. Cognitive biases and risk perception In looking at the first three cognitive biases (i.e. overconfidence, illusion of control and representativeness), this master thesis confirms the causal relationship between these cognitive biases and decreased risk perception. This is in line with existing insights, in which entrepreneurship scholars posit that the three mentioned cognitive biases apparently influence the level of risk perception negatively (De Carolis & Saparito, 2006; Keh et al., 2002; Simon et al., 1999). Surprisingly, and contrary to existing studies, my research empirically supports the causal relationship between the three cognitive biases and risk perception. Simon et al. (1999) found that overconfidence has an orthogonal role, whereas illusion of control and representativeness seemed to affect risk perception. By the same token, Keh et al. (2002) only found empirical support for the causal relationship between illusion of control and risk perception. Overconfidence and representativeness had no effect on risk perception in their study. This thesis, then, proves that overconfidence matters, even though it was measured with six items (cf. ten items in Keh et al., 2002 and Simon et al., 1999). Thus, while the theoretical study of De Carolis and Saparito (2006) was published later, they are right in maintaining the overconfidence construct as an important role in explaining risk perception and exploitation of entrepreneurial opportunities. Standing by cognitive biases, I proposed that status quo bias should be considered as an important entrepreneurial cognitive bias, in explaining risk perception and entrepreneurial behaviour. However, this notion was not supported empirically in this thesis. There are several explanations that can clear this finding. First, the measurement of status quo bias was not in fully accordance of previous studies. Whereas previous empirical studies controlled the measurement of the status quo bias for choice The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 45
    • Ahmed Bulut preference (e.g. Burmeister & Schade, 2007), I chose to omit that in the interest of brevity. Thus, when a respondent opts for buying a Samsung MP3-player (see questionnaire in the appendix), it may be that the respondent prefers this type of MP3-player personally. In that case, preference was measured instead of status quo, although respondents were asked to move themselves to the person facing the status quo. Another explanation for the absence of causal relationship is the empirical finding of Burmeister and Schade (2007) that entrepreneurs are not different than others regarding the status quo. They found that entrepreneurs are as status quo biased as students, but less biased than bankers. Thus, it seems that an individual does not have to be an entrepreneur to face the status quo bias. A third explanation can be found in the status quo bias itself. A status quo situation could be a rational choice rather than an intuitional one (Masatlioglu & Ok, 2005). More concretely, the status quo is the reference point in decision making and alternative options are evaluated first before making a decision (Kahneman, 2003). In sum, status quo bias seems irrelevant in the context of entrepreneurship. The very idea that decision makers stick with the status quo (Samuelson & Zeckhauser, 1988) seems to be outdated in the entrepreneurial environment. Maybe, the other side of status quo bias is true for entrepreneurs, for example with more openness to new options than others (Burmeister & Schade, 2007). Risk perception and entrepreneurial behaviour It was found in this thesis that risk perception plays a very important role in predicting entrepreneurial behaviour. Specifically, I found that perceiving low risk results in exhibiting high levels of entrepreneurial orientation. Similar results were found in previous studies, in which decreased risk perception strongly affects entrepreneurial opportunity evaluation (Keh et al., 2002) and even the decision to start a venture (Forlani & Mullins, 2000; Simon et al., 1999). Sitkin and Weingart (1995) and Weber and Milliman (1997) found that risk perception is the most important factor influencing risky decision making behaviour. This thesis again emphasizes the fact that it is risk perception (and not risk propensity) which enhances entrepreneurial behaviour. It was further found that, as expected, this explanation has a stronger basis for independent entrepreneurs, as compared to intrapreneurs. Thus, it seems that entrepreneur type also matters in this case. As discussed in the theory section, independent entrepreneurs are more prone to risky actions and uncertainty, motivating them to work harder than other people, resulting in higher entrepreneurial orientation. Thus, it seems that Baron (1998) is right in concluding that independent entrepreneurs are more than average confronted with information overload, uncertainty, novel situations, strong emotions, time pressure and fatigue. This, in effect, force independent entrepreneurs to be blind for business risks, resulting in stronger entrepreneurial behaviour. In summary, on a more abstract level, decreased risk perception clearly leads to the exploitation of entrepreneurial opportunities, as De Carolis and Saparito (2006) argue, in which risk perception mediates the relationship between The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 46
    • Ahmed Bulut antecedents of entrepreneurial behaviour and this behaviour itself. Albeit this observation is not new, the distinction between independent entrepreneurs and intrapreneurs contributes to existing knowledge about factors enhancing entrepreneurial behaviour. In accordance with Palich and Bagby (1995), it was found in this thesis that entrepreneurs do not prefer to take risk (i.e. risk propensity), but they perceive less risk. Later studies also confirmed the very presence of low risk perception in entrepreneurial activities and disconfirmed the importance of risk propensity (e.g. Simon et al., 1999; Keh et al., 2002; Burmeister & Schade, 2007). It was observed in this thesis that the mediating effect of risk perception on entrepreneurial orientation was stronger than a direct effect model in which cognitive biases explain entrepreneurial orientation. This is in accordance with previous research, in which risk perception seemed to be the golden construct explaining risky behaviour (Sitkin & Weingart, 1995; Weber & Milliman, 1997; Simon et al., 1999; Keh et al., 2002). Independent entrepreneurs and intrapreneurs An additional and interesting finding of this thesis is that independent entrepreneurs are different from intrapreneurs in several ways. Almost all study variables seems to differentiate intrapreneurs and independent entrepreneurs. Independent entrepreneurs are more prone to overconfidence, illusion of control and representativeness biases. Also, independent entrepreneurs perceive less risk than intrapreneurs and they exhibit more entrepreneurial behaviour (E.O.) than intrapreneurs. Finally, intrapreneurs and independent entrepreneurs do not differ in terms of risk propensity and status quo bias. It was already demonstrated that independent entrepreneurs manifest more overconfidence than managers (Busenitz & Barney, 1997). As argued in the first chapter, intrapreneurs have more in common with managers than independent entrepreneurs. Forbes (2005) demonstrated that independent entrepreneurs are more overconfident compared to other people. This thesis extends previous findings in confirming that independent entrepreneurs are more overconfident than intrapreneurs. With respect to representativeness, previous research already affirmed the stronger reliance of independent entrepreneurs to it, as compared to managers (Busenitz & Barney, 1997). Again, I adapt this observation by stating that independent entrepreneurs are not only prone to representativeness as compared to managers, but also as compared to intrapreneurs. To my knowledge, the illusion of control bias is not investigated till know, regarding differences between independent entrepreneurs and others. However, my finding that independent entrepreneurs are more prone to this bias than intrapreneurs is analogues to the other two cognitive biases. In sum, I expand previous observations by concluding that cognitive biases not only differentiate independent entrepreneurs from managers, but also from intrapreneurs. Status quo bias is an exception here, since it does not differentiate The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 47
    • Ahmed Bulut entrepreneurs, which is consistent with recent research (Burmeister & Schade, 2007). These authors are inevitable true in concluding that entrepreneurs are not different than others regarding status quo in decision making, but they are wrong in abstracting this finding to the theorem that entrepreneurs are not more biased than others (p. 354). Risk propensity seems to be irrelevant in the context of entrepreneurship. It also does not separate independent entrepreneurs from intrapreneurs. This is in line with Palich and Bagby (1995), who found that entrepreneurs are not distinct from nonentrepreneurs regarding their level of risk propensity. Recent replication of this yielded the same conclusion (Norton & Moore, 2006). However, meta analysis shows that entrepreneurs are more prone to risk propensity than managers (Stewart & Roth, 2001). Thus, it can be concluded that there is a discussion about risk propensity differences between several agents, but independent entrepreneurs do not tolerate risks more than intrapreneurs. Another finding is that independent entrepreneurs perceive less risk associated with a business opportunity as compared to intrapreneurs. How does this relate to previous research, although this issue is not investigated till know? Entrepreneurship research suggests that independent entrepreneurs perceive and think different about risk than others. For example, empirical research found that entrepreneurs assess risk more favourably than others (Norton & Moore, 2006). Busenitz and Barney (1997) suggest that independent entrepreneurs are likely to perceive less risk in a given decision situation than are managers (p. 24-25). Assumed that intrapreneurs are close to managers, it is reasonable that independent entrepreneurs perceive less risk than intrapreneurs. It makes sense that independent entrepreneurs perceive low risks, because they operate thanks to the fact that they perceive low risks. Perceiving no risk inevitably open the doors to start a venture by independent entrepreneurs. An interesting issue is the difference between independent entrepreneurs and intrapreneurs regarding the level of entrepreneurial behaviour. With 15 items, the level of entrepreneurial behaviour is broadly measured in this thesis, using E.O. items as suggested by Stull (2005). It was found that independent entrepreneurs manifest more entrepreneurial orientation than intrapreneurs: independent entrepreneurs act more entrepreneurially than intrapreneurs. In looking at intrapreneurs and independent entrepreneurs themselves, it becomes clear why this difference exists. Independent entrepreneurs, more than other agents, face many situations characterized with uncertainty, novelty, emotions and pressure (Baron, 1998) and have to work for self gain, whereas intrapreneurs work in a relatively safe organizational and well organized setting. This difference is expressed in the extent of entrepreneurial behaviour, from which logically follows that independent entrepreneurs exhibit more entrepreneurial orientation compared to intrapreneurs. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 48
    • Ahmed Bulut Future directions Although I answered some interesting research questions regarding the field of entrepreneurship, this thesis motivates additional research. From the combination of previous research and this master thesis, I derived six future avenues regarding cognitive biases and entrepreneurial behaviour. First, this master thesis clearly shows that independent entrepreneurs differ from intrapreneurs with respect to cognitive biases, risk perception and entrepreneurial behaviour. In the past decade, scholars truly emphasize the possibility of entrepreneurship in corporate settings (i.e. intrapreneurship). For future research, it is important not to talk about entrepreneurs in general, because there does not exist such thing like “the entrepreneur”. Thus, scholars should recognize this in making distinction between, for example, independent entrepreneurs and intrapreneurs in their research. Another important point is research method. The great majority of empirical entrepreneurial research have a cross sectional nature (Chandler & Lyon, 2001; Bouckenooghe et al., 2007). This thesis deals with causal relationships, and since hypotheses were tested with a single cross sectional study, care must be taken in generalizing the results. This is because a single study cannot fully confirm the presence of causality. From a logical positivist view, independent and dependent variables should be measured with a time span between the measurements to ensure causality. Since I, for a great part, replicated two cross sectional studies (i.e. Simon et al., 1999; Keh et al., 2002), the results of my thesis are not fully in accordance with previous ones. Longitudinal research can clear this. Surprisingly, analysis of 291 entrepreneurship studies publicized from 1989 to 1999 in top journals showed that only 19 of them (or 7 percent) were truly longitudinal, involving multiple data collection, real time case analysis or multiyear analysis of archival data (Chandler & Lyon, 2001 in: Van de Ven & Engleman, 2004). Thus, in general, future entrepreneurial research should focus on longitudinal research. Indeed, laboratorial experimental methods are very suitable in identifying causality (Davidsson, 2005). Third, the status quo bias should be re-examined in the entrepreneurial setting. Consistent with previous empirical results (Burmeister & Schade, 2007), it was found in this thesis that status quo bias is irrelevant in entrepreneurial settings. However, the measurement of this construct was limited in this thesis. To what extent are entrepreneurs prone to the status quo? Are intrapreneurs, in this respect, different from independent entrepreneurs? Is the status quo bias a real bias, or is it a form of rational thinking, in which an individual consciously decides to reuse a previously made decision? Furthermore, this issue can be longitudinally researched by comparing decisions of respondents, in order to check whether entrepreneurs are really prone to this bias. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 49
    • Ahmed Bulut Another point for future research concerns switching from intrapreneur to independent entrepreneur (and vice versa). In this thesis, study variables are measured through a snapshot. However, since cognitions can be changed (Mitchell et al., 2007), how do cognitive biases develop over time? And more interesting, how do cognitive biases and entrepreneurial behaviour change when an intrapreneur leaves the company to start an own venture (and vice versa)? Could an independent entrepreneur function when he leaves his company to become an intrapreneur elsewhere? These questions are very important in determining the value of a single study analyzing differences between independent entrepreneurs and intrapreneurs, like this master thesis. Fifth, cultural backgrounds and type of entrepreneurs may affect research results. In this thesis, respondents were Dutch independent entrepreneurs and intrapreneurs. Subjects in Simon et al. (1999) consisted of U.S. students, whereas Keh et al. (2002) surveyed actual independent entrepreneurs in Singapore. Students may danger the external validity of research, but the cultural settings may also influence study variables as explored in this thesis. For example, in some cultures it is common to avoid uncertainty (Hofstede, 1984), which may affect the level of risk perception. Cognitive biases and the level of entrepreneurship are also influenced by culture (Busenitz & Lau, 1996). This thesis did not reckon with culture and this may partly explain the differences between research results of this thesis and previous research. Future research should recognize and reckon with this issue. Finally, in this thesis I explored four cognitive biases in entrepreneurial context. However, there are more biases to be explored. For example, Keh et al. (2002) explored the planning fallacy bias, which for a matter of fact seemed irrelevant. Some others should be examined in the future, such as availability bias and hindsight bias (Barnes, 1984). In sum, there are many interesting avenues for the future of entrepreneurial research, in which existing models of entrepreneurial cognitions should be extended and refined. 5.3 Practical implications Now I have discussed the research finding research avenues within the field of entrepreneurial cognitions, I will present several practical implications for entrepreneurs and policy agents. First, intrapreneurs have to aware that their realization of entrepreneurial behaviour is distinct from entrepreneurs owning a company. While intrapreneurs are prone to biases and high level of entrepreneurial behaviour substantially, it remains lower than independent entrepreneurs. Highly ambitious intrapreneurs thus may face function problems when they want to start an own venture. The other way around, it is also questionable when an independent entrepreneur quits the venture and start as an intrapreneur. This study clearly shows that both groups of entrepreneurs work in different The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 50
    • Ahmed Bulut settings and this inevitably affect their level of entrepreneurial behaviour due to exposition to certain cognitive biases. However, when an intrapreneur notices that he is not entrepreneurial enough for his position during his duty, it is still worth considering a temporarily switch to an independent entrepreneur by starting an own venture. In doing so, he can develop certain cognitive biases and consequently his entrepreneurial behaviour. Since independent entrepreneurs contribute a lot to the national economy, they thereby also contribute to the society by creating jobs. Another implication of my research is that organizations can develop a tool in which job candidates can be assessed by measuring their level of cognitive biases. When it seems that cognitive biases of a candidate are high, it can be expected that this candidate will, most probably, exhibit a high level of entrepreneurial behaviour. When this matches the job description, it can help HR managers to evaluate candidates. A manager may expect from his subordinates a lot of entrepreneurial behaviour for certain positions. When the manager notices that his subordinate is risk averse, far from innovative and non pro active (i.e. not intrapreneurial), he can give his subordinate tips to enhance his entrepreneurial behaviour. For example, he can make his subordinate feel more overconfident by stressing that his subordinate should feel comfortable with his existing knowledge and treating them as facts. This can enhance his overconfidence feelings and subsequently his entrepreneurial behaviour. Second, the manager can make his subordinate aware that specific situations are under his subordinate’s control. Additionally, the manager can induce him to control situations, for example by arousing that he can make good estimations about future demand and new entries of competitors. Third, a manager can advise his subordinate not to hesitate to see his past experience as holy, which can form the basis of decision making by the subordinate. All of these managerial recommendations may enlarge the level of entrepreneurial orientation of non entrepreneuring working individuals. After a few years of intrapreneurial experience, an intrapreneur may look for ways to develop himself further in his carrier. A next step may be leaving the company and starting an own one. If possible, an organization can decide to take distance of the department leaded by the intrapreneur, whereby the intrapreneur becomes the new owner of the department. In this way, an intrapreneur can work for self gain and this may enhance his cognitive misperceptions and his entrepreneurial spirit. In doing so, he may feel further development in his carrier. Therefore, from the perspective of working intrapreneurs, managers and policy agents should not keep their intrapreneurs too long. In sum, policy agents should stimulate individual entrepreneurship instead of retaining intrapreneurs too long. This implies that organizations may be split up and may focus on small scale operations. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 51
    • Ahmed Bulut These kinds of decisions enhance the collective entrepreneurial soul of people, which may contribute to a stronger national economy and society. In this chapter, I evaluated the research findings and have portrayed several important theoretical and practical deductions. In the next chapter, I will pay attention to the research questions and answer them. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 52
    • Ahmed Bulut 6. Conclusion In this last section, I will draw conclusions on the basis of research questions formulated in the first chapter and answer them by considering research implications as depicted in the former chapter. Also, I will pay attention to the limitations of my research. 6.1 Research conclusions In this master thesis, I wondered how certain cognitive biases explain the exploitation of entrepreneurial opportunities. Since entrepreneurship not solely belongs to independent entrepreneurs, working individuals with entrepreneurial behaviour (i.e. intrapreneurs) are also considered. Here, I will answer the research questions as formulated in the first chapter. First, I devoted attention to the difference between independent entrepreneurship and intrapreneurship. In reviewing literature, I concluded that both groups of entrepreneurs share the same spirit. The major difference seemed that intrapreneurs do not work for self gain, whereas independent entrepreneurs do. Intrapreneurs are in the pay of an organization and independent entrepreneurs work for self gain. However, both pursue entrepreneurial opportunities on behalf of the company they work. The second sub question dealt with the above mentioned entrepreneur types and entrepreneurial behaviour. A hardcore independent entrepreneur is an individual owning a company with at least ten subordinates. An intrapreneur, then, is a working individual within a company with at least 50 employees, in which this individual exhibits many entrepreneurial activities. I saw that recent literature emphasize entrepreneurial possibilities within existing organizations. Exploiting entrepreneurial opportunities means bringing into practice advantageous opportunities from which the organization may profit as I concluded in the theory section. In terms of behaviour, this means that both independent entrepreneurs and intrapreneurs should exhibit high levels of entrepreneurial orientation. Measurement showed that this is indeed the case, although independent entrepreneurs exhibit more entrepreneurial behaviour than intrapreneurs. The third sub question entails the relationship between cognitive biases and entrepreneurial behaviour of independent entrepreneurs and intrapreneurs. In the theory section, I related four cognitive biases to the level of entrepreneurial opportunities. In line with former studies, I hypothesized that overconfidence, illusion of control and representativeness will lead to decreased levels of risk perception and subsequently to higher levels of entrepreneurial behaviour. Additionally, I theorized that holding a status quo will also result in higher levels of entrepreneurial orientation, because always making the same decisions may lead to blindness to risk, resulting in more entrepreneurial behaviour. I also claimed that all of these processes will be stronger for independent entrepreneurs as compared to The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 53
    • Ahmed Bulut intrapreneurs, because the former face more uncertain situations and pressure, resulting in stronger biases and stronger levels of entrepreneurial behaviour. In conducting an internet survey, it appeared that entrepreneurs, in general, are virtually prone to cognitive biases (except to the status quo), low levels of risk perception and high levels of entrepreneurial behaviour. This story, then, corresponds with intrapreneurs, but (as expected), it holds stronger for independent entrepreneurs. Actually, this observation is the main finding of this master thesis. The function of risk perception in this entrepreneurial process is the fourth sub question of this master thesis. I found that the level of risk perception plays a substantial, very important role within the context of entrepreneurial behaviour and cognitive biases. That is, cognitive biases affect risk perception in the way that these biases substantially lower the level of perceived risk, associated with a business situation. As entrepreneurs perceive too less risk, they are induced to behave entrepreneurially, by taking risks, operating pro actively and by developing new products and services. Thus, consistent with recent research, entrepreneurs do not consciously take risk, but they perceive risk scarcely. In statistical terms, risk perception has a full mediation effect within the process of exhibiting cognitive biases and entrepreneurial behaviour. With these four sub questions and ditto answers, I can answer the main question of this thesis, which was formulated as follows: how do cognitive biases explain the exploitation of entrepreneurial opportunities in differentiating independent entrepreneurship and intrapreneurship? Entrepreneurs, be it independent entrepreneurs or intrapreneurs, are influenced by certain cognitive biases. This results in perceiving too few risks, which engender risky behaviour. Both under intrapreneurs, but stronger for independent entrepreneurs. Thus, the very idea that risk perception explains the occurrence of risky actions (Sitkin & Weingart, 1995; Weber & Milliman, 1997; Simon et al., 1999; Keh et al., 2002) seems still to be true. At general level, I have filled in some important research gaps, which were explained in chapter 1. Mitchell et al. (2002) and Forbes (1999) question the relationship between cognitive biases and entrepreneurial actions, whereas Hisrich et al. (2007) wonder how cognitive processes relate to entrepreneurial exploitation activities. Similarly, Baron and Ward (2004) direct future research to reasoning and decisive differences between (independent) entrepreneurs and others. My research refined existing models about biases and entrepreneurial activities and it was found that independent entrepreneurs are indeed different from their intrapreneuring colleagues with respect to their level of cognitions, perceived risk and behaviour. Future research should reckon with culture and other cognitive biases not explored in this thesis and should focus on longitudinal studies. Furthermore, the effects of changing position from intrapreneur to independent entrepreneur (and vice versa) should be explored. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 54
    • Ahmed Bulut 6.2 Limitations Despite an important contribution to our existing knowledge about entrepreneurial cognitions and entrepreneurial behaviour, care must be taken in generalizing this study’s findings. First, the actual response under intrapreneurs was of an acceptable level (n=72). Unfortunately, response under independent entrepreneurs was below the required n of 60; only 43 independent entrepreneurs participated in my research. This prevents us to generalize the findings with respect to independent entrepreneurs. The second major limitation of this research is the use of a single method to gather data. Ideally, entrepreneurial research should focus on longitudinal research and combination of research methods (Bouckenooghe et al., 2007). To overcome this common method bias, I recruited respondents on the basis of multiple channels (i.e. several organizations and the use of internet additionally) to enhance validity. Third, and related with the former limitation, data is gathered by means of self report. This is a serious issue in social research, because people may overestimate themselves, for example with their entrepreneurial orientation levels. This gives my research a subjective character. However, I compared two groups (i.e. intrapreneurs and independent entrepreneurs) with each other, thus this may have counterbalanced this problem. With respect to six items measuring overconfidence, subject may have searching on internet for the right answers, since subjects filled in the questionnaire online. This may affect the level of overconfidence as reported in the previous chapter. But, again, since I compared two groups, this problem outweighed each other. Although subjects were distributed among several organizations, only Dutch speaking respondents were involved in this research. This cuts the generalizability of my research findings, since cultural values may influence the study variables as I pointed out in the previous chapter. Therefore, my research findings may only valid in the Dutch context. Another limitation is the measurement of the status quo bias in this thesis. To prevent too long questionnaires, status quo preferences were not controlled for actual preferences of subjects. Thus, the status quo bias is not adequately reflected in this research, compared with previous studies in which the status quo bias was measured extensively. However, the problem with many research variables is The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 55
    • Ahmed Bulut that including too much questions in a questionnaire can make respondents tired. Therefore, I only focussed on actual decisions in measuring the status quo bias. As indicated earlier, I only focussed on four cognitive biases in the entrepreneurial context. Although three cognitive biases explained the majority of mediating and dependent variables, there exist more cognitive biases that can influence the level of risk perception and entrepreneurial behaviour. However, it can also be argued that three cognitive biases explain the level of entrepreneurial behaviour already to a very great extent, thus additional research on cognitive biases might not contribute to our existing knowledge about cognitive biases. Finally, non response bias could not be measured in this master thesis, since the questionnaire was not distributed simultaneously among involved parties. Due to practical reasons, including several organizations to one research seems not a problem, but distributing the questionnaires simultaneously leads to practical complexities. Despite these shortcomings, this master thesis provides a valuable contribution to our existing knowledge about entrepreneurial cognitions and entrepreneurial behaviour. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 56
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    • Ahmed Bulut Tversky, A. and Kahneman, D. 1991. Loss aversion in riskless choice: a reference dependent model. The Quarterly Journal of Economics, 106: 1039-1061. Van Praag, C. and Versloot, P. 2007. What is the value of entrepreneurship? A review of recent research. Small Business Economics, 29: 351-382. Van de Ven, A. and Engleman, R. 2004. Event and outcome driven explanations of entrepreneurship. Journal of Business Venturing, 19: 343-358. Van der Veen, M. and Wakkee, I. 2006. Understanding the entrepreneurial process. In: (eds) Davidsson. New firm startups. Cheltenham: Edward Elgar Publishing Ltd: 114-152. Weber, E. and Milliman, R. 1997. Perceived risk attitudes: relating risk perception to risky choice. Management Science, 43: 123-144. Wennekers, S. and Thurik, R. 1999. Linking entrepreneurship and economic growth. Small Business Economics, 13: 27-55. Winship, C. and Mare, R. 1992. Models for sample selection bias. Annual Review of Sociology, 18: 327-350. Zahra, S. and Covin, J. 1995. Contextual influences on the corporate entrepreneurship-performance relationship: a longitudinal research. Journal of Business Venturing, 10: 43-58. Internet references Intermediair. 2007. Het nieuwe werken - 7 trends die je professionele leven veranderen. URL: http://www.intermediair.nl/artikel.jsp?id=693322 (15 January 2008). MKB Nederland. URL: http://www.mkb.nl (28 April 2008). The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 63
    • Ahmed Bulut Appendix 1: involved parties Five organizations were involved in this thesis: (1) ABN AMRO, (2) VNO-NCW, (3) Philips Lighting, (4) Kobalt and (5) Vesting Finance Holding. Here, some information about the main organizations is included. ABN AMRO14 ABN AMRO is a prominent global financial organization, with its headquarter in Amsterdam. In 2007, ABN AMRO reported a net profit of € 1.8 million. The services of the bank include bank deposits, insurances, funds and mortgages. The bank is active in 53 countries and has a worldwide staff of 99,000 FTE. Recently, the bank was acquired by RBS, Fortis and Santander. ABN AMRO has more than 4,000 branches worldwide. Employees of the several departments were approached. Most of the respondents are employed at the Dialogues House department, an independent organization within and owned by ABM AMRO. This department support entrepreneurial behaviour among employees by doing research, networking and seminars. VNO-NCW15 This is the Confederation of Netherlands Industry and Employers. Specifically, their office in Apeldoorn was involved in my research. In their online news bulletin, they devoted attention to my research, in which the questionnaire link was included. In total, 2.150 members received this online news bulletin. Members are independent entrepreneurs in the provinces Gelderland, Utrecht, Flevoland and Overijssel. Other participants Philips Lighting in Eindhoven participated in contacting several intrapreneurs. Philips is the wellknown Dutch manufacturer of consumer electronics, the lighting division focuses on consumer lighting products. Kobalt, then, is a media office centre in Amstelveen. They carry out research and provide solutions for companies wanting marketing communication broadcasts. Several intrapreneurs participated in my research. Finally, some intrapreneurs of Vesting Finance Holding filled in the questionnaire. This company is situated in Hilversum and their core business is providing credit management solutions. In all of these companies, it was first filtered in which departments the most entrepreneurial employees work. All of these companies have a minimum employee base of 50. 14 15 See also www.abnamro.com and www.dialogueshouse.nl for more information. See also www.vno-ncwmidden.nl. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 64
    • Ahmed Bulut Appendix 2: questionnaire Here, I have included the English version of the questionnaire. Mailing text Dear Sir/Madam, Currently, I am engaged in a research about entrepreneurial behaviour. You will help me a lot by filling in this online survey. It is divided in four parts; it costs you approximately 15 minutes to fill in the questionnaire by clicking on the link below. Note that there are no good or wrong answers. Your answers will be treated confidentially. Please fill in all the questions, otherwise it cannot be used. The deadline of this survey is 18 July 2008. I will appreciate your cooperation, many thanks in advance! Yours faithfully, Ahmed Bulut VU University Amsterdam Part 1: background and control variable Sex, highest education followed, age, organization (employee and in the pay of ABN AMRO, employee and in the pay of X, owner of a business (small or middle sized) or ‘other’), full time or part time employment and years of employment. Please answer the following items by choosing one alternative you feel most comfortable with. 1A) Receiving € 32.000 for sure. 1B) An 80% chance of getting € 40.000. 2A) Receiving € 30.000 for sure. 2B) A 20% chance of getting € 150.000. 3A) Receiving € 180.000 for sure. 3B) A 90% chance of winning € 200.000 4A) Receiving € 16.000 for sure. 4B) A 10% chance of getting € 160.000. 5A) Receiving € 25.000 for sure. 5B) A 50% chance of getting € 50.000. Part 2: E.O. For each statement below, please indicate to what degree you agree with it. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 65
    • Ahmed Bulut In the course of my work, I… -- - +/- + ++ 1. Approach new projects or activities in a cautious manner (reverse coded) 2. Do things that have a chance of not working out 3. Avoid taking calculated risks (reverse coded) 4. Engage in activities that have a chance of not working out 5. Will take calculated risks despite the possibility of failure 6. Keep ahead of changes instead of responding to them 7. Actively fix or improve things I don’t like 8. Act in anticipation of future problems, needs, or changes 9. Take the initiative to start projects 10. Tend to implement changes before they are needed 11. Generate useful new ideas 12. Develop new processes, services or products 13. Approach business tasks in innovative ways 14. Find new ways to do things 15. Often do things in unique ways Part 3: overconfidence Please answer the following items, by deciding the ranges, which the right answers may be in. You should be 90% certain that the correct answers are in these ranges. If you have absolutely no idea where the answer lies, please fill in the maximum range possible for the question (i.e., 0 to 1,000). Please fill in the questions as quick as possible, on the basis of what you know at the moment. It does not matter whether or not you state the correct interval. 90% confidence that (Correct answer will be within answer) this range Lower limit Example: what is the total population of Holland in 2007? Upper limit 15 mln. 17 mln. 1. How many cars are sold in the period January 2008 – April 2008 in 16,4 mln. 206.067 Holland? 2. How many euro did the Dutch companies spend on advertising in 2007? 6,1 mld. 3. How many foreign tourists did visit Holland in 2007? 11 mln. 4. How many students (high schools and universities) were signed up at 585.000 the beginning of the academic year 2007-2008 in Holland? The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 66
    • Ahmed Bulut 5. How many percent of the Dutch population was a victim of a crime in 25,8% 2007? 6. How many citizens per squared kilometre (km2) did Holland have in 485 2007? 7. How many broadband internet connections did Holland have in 2007? 5,6 mln. 8. What is the average daily press rate of the Dutch paper Het Financieele 59.371 Dagblad in Holland in 2007? 9. How many children (max. 13 years old) in Holland went to an official 625.000 nursery (kinderopvang) in 2007? 10. What is the distance (in kilometres, in a straight line) from Amsterdam 12.228 Schiphol Airport to Jakarta? Part 4: illusion of control Please answer the following items by deciding how much you agree with the statements. -- - +/- + ++ 1. I can accurately forecast the total demand for my business 2. I can accurately forecast when larger competitors will enter the market 3. I can make my business a success, even though others may fail. Part 5: risk perception and representativeness Please read the following case, which is about a new business opportunity for Mr Jansen. For the moment, shift yourself to the position of Mr Jansen. Karel Jansen is a successful manager at Blok N.V. in Rotterdam. He has four years of experience at this company and has a high ranked position there. Before that, he worked as a trader for a small local company in Schiedam. He likes to be his own boss and taking risks, which can make him a potential millionaire. In order to realize this, he thinks quitting Blok N.V. and starting an own company… Mr Jansen is checking whether his new business idea is realistic or not. He has no money to carry out market research in order to check if his business idea is worth considering. He spoke to some well informed potential customers and they gave Mr Jansen positive feedback. Also, his best friends recommend Mr Jansen to start the new business. Mr Jansen is very enthusiastic about his business idea even he has no experience in this industry or starting an own company. He feels that he can earn a lot of money in starting this business, based on the recommendations of potential customers and his friends. Existing companies are also aware of the opportunity, but they did not aim at that market. Mr Jansen feels that these companies will only enter this business, when it is proven that it is a successful business. He is not sure if this market is growing or mature. He finds that there only a few small firms that are still surviving in this industry. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 67
    • Ahmed Bulut Mr Jansen thinks that he needs 200,000 euro to finance the new business, but he has only 70,000 euro at his bank account. So he has to borrow the rest or ask others to help him financially. Answer the following items by deciding how much you agree with the statements. -- - +/- + ++ 1. The overall risk of this business is high. 2. The probability of failure is high. 3. The founder stands to lose a lot financially. 4. There is a lot uncertainty when predicting how well the business will do. Please state three issues that influenced your view on whether Mr Jansen should start the above described business. Keep it short and simple. A) E.g.: his friends are positive about the opportunity. B) E.g.: he feels that he can earn a lot of money. C) E.g.: he has business experience. Part 6: status quo bias Please read the following short stories and indicate your decision choice. 1. During your last boat trip in Amsterdam, your new MP3 player (from Creative) fell into the water. So you also lost the many music clips that were stored on your MP3. You are planning on buying a new one. Which model are you going to buy? A) You decide to buy a Creative (8 GB memory, 119 euro). B) You decide to buy an iRiver (2 GB memory, 79 euro). C) You decide to buy a Samsung (12 GB memory, 159 euro). 2. You are the owner of a service company with four locations. Due to a lack of space, you want to rent new office space. You investigated the possibilities and you found that there are three locations that could work. These are located at different areas of a city, with different layouts, but also different rental costs. Your current four offices are located in an average area. Which office space will you rent? A) Office accommodation A: average area, average layout, high price. B) Office accommodation B: bad area, good layout, medium price. C) Office accommodation C: good area, bad layout, good price. 3. You are sitting in a café in Paris, with your digital camera beside you on the table. Suddenly, a thief is stealing your camera, while you are not taking care for a few seconds. You have already planned an evening with your friends when you return home, and you do not want to miss showing the beautiful The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 68
    • Ahmed Bulut photos you were going to take on tomorrow’s tour through Paris, including a visit to the Eiffel Tower. You decide to immediately buy a new camera. Your last photos were taken with digital camera A. What camera are you going to buy? A) Digital camera A: 5 megapixel, 2 GB memory, 450 euro. B) Digital camera B: 3 megapixel, 1 GB memory, 299 euro. C) Digital camera C: 2 megapixel, 512 MB memory, 199 euro 4. Two month ago, you ordered a new grey Audi A3 sedan car at the car dealer. You agreed that the car will be delivered with all the extra options you indicated two month ago. However, one month ago the dealer informed you that the factory lowered the frequency of Audi’s with extra options. Consequently, in order to speed delivery, you agreed to accept any of other colours the Audi A3 comes in. This morning, you were invited to the dealer to pick up your new car. You are surprised to learn that three other cars (with the same extra options) arrived at the dealer that morning. Which car will you choose? A) The original grey Audi A3. B) A blue Audi A3. C) A red Audi A3. D) A black Audi A3. Part 7: comments If you have comments regarding this research, please specify it here. I would like to thank you very much for your cooperation! Yours faithfully, Ahmed Bulut The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 69
    • Ahmed Bulut Appendix 3: questionnaire (translated) Here, the Dutch translation of the questionnaire is stated. Mailing text Beste respondent, Als student aan de Vrije Universiteit te Amsterdam ben ik momenteel bezig met mijn afstudeeronderzoek, met ondernemend gedrag als onderwerp. Door het invullen van een vragenlijst levert u een belangrijke bijdrage aan mijn onderzoek. Het onderzoek bestaat uit vijf onderdelen, er zijn geen goede of foute antwoorden. Uw gegevens zijn op geen enkele wijze achterhaalbaar, dus de antwoorden worden vertrouwelijk behandeld. Het invullen van de vragenlijst kost 12 tot 16 minuten en u kunt hem invullen tot uiterlijk 18 ju1i 2008. Meedoen aan deze enquête is heel eenvoudig, u hoeft alleen maar op de volgende link te klikken: http://www.thesistools.com/?qid=55014&ln=ned Alvast heel erg bedankt voor uw medewerking en succes met uw bezigheden! Met vriendelijke groet, Ahmed Bulut Masterstudent Beleid, Communicatie & Organisatie Vrije Universiteit Amsterdam P.S: mocht de link niet werken, kopieer hem dan naar uw browser. Part 1: background and control variable Geslacht, hoogst genoten opleiding, leeftijd, werkzaamheid (in dienst van een organisatie, eigenaar van een bedrijf (min. 10, max. 250 medewerkers) of ‘anders’) en aantal jaren in dienst. Kunt u hieronder per vraag aangeven welke optie uw voorkeur geniet? 1A) Het verkrijgen van € 32.000. 1B) 80% kans om € 40.000 te verdienen. 2A) Het verkrijgen van € 30.000. 2B) 20% kans om € 150.000 te verdienen. 3A) Het ontvangen van € 180.000. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 70
    • Ahmed Bulut 3B) 90% kans om € 200.000 te verdienen. 4A) Het verkrijgen van € 16.000. 4B) 10% kans om € 160.000 te verdienen. 5A) Het verkrijgen van € 25.000. 5B) 50% kans om € 50.000 te verdienen. Part 2: E.O. Kunt u bij elke bewering hieronder aangeven in hoeverre u het eens bent met de stelling? Tijdens mijn werk… -- - +/- + ++ 1. Benader ik nieuwe projecten en activiteiten op een voorzichtige manier 2. Doe ik dingen die uiteindelijk misschien niet goed zullen lukken 3. Vermijd ik het nemen van voorgecalculeerde risico’s 4. Houd ik mij bezig met activiteiten die wellicht niet goed zullen lukken 5. Neem ik risico’s, ondanks de kans op mislukkingen 6. Loop ik vooruit op ontwikkelingen in plaats van erop te wachten 7. Doe ik pro-actief dingen of verbeteringen die ik eigenlijk niet leuk vind 8. Anticipeer ik op toekomstige problemen, behoeften of veranderingen 9. Neem ik het initiatief om projecten op te starten 10. Voer ik veranderingen door voordat ze echt nodig zijn 11. Genereer ik bruikbare ideeën 12. Ontwikkel ik nieuwe processen, producten of diensten 13. Benader ik zakelijke werkzaamheden op een innovatieve manier 14. Ontdek ik nieuwe manieren om dingen uit te voeren 15. Voer ik vaak dingen op een unieke wijze uit Part 3: overconfidence Beantwoord de volgende vragen door twee getallen in te vullen: een minimumgrens en een maximumgrens. U moet wel voor 90% zeker zijn dat het correcte antwoord tussen die twee waarden ligt. Mocht u geen idee hebben wat het antwoord is, vul dan de hoogst mogelijke getallen in (b.v. 0 tot 1.000). Vult u de vragen alstublieft in zonder al te lang na te denken, op basis van wat u nu allemaal weet. Het doet er niet toe of u de perfecte getalsgrenzen geeft. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 71
    • Ahmed Bulut 90 % zekerheid dat het (Correcte antwoord tussen deze antwoord) waarden ligt Ondergrens Voorbeeld: hoeveel inwoners had Nederland in 2007? Bovengrens 15 mln. 17 mln. 1. Hoeveel euro heeft het Nederlandse bedrijfsleven in 2007 uitgegeven 16,4 mln. 6,1 mld. aan reclame? 2.Hoeveel toeristen hebben Nederland bezocht in 2007? 11 mln. 3. Hoeveel studenten (hbo en WO) waren in het begin van het studiejaar 585.000 2007-2008 ingeschreven? 4. Hoeveel inwoners telde Nederland per vierkante kilometer in 2007? 485 5. Hoeveel exemplaren van Het Financieele Dagblad werden er 59.371 gemiddeld (per dag) gedrukt in 2007? 6. Wat is de afstand (in kilometers hemelsbreed) van Schiphol tot Jakarta? 12.228 Part 4: illusion of control Kunt u hieronder aangeven in hoeverre u het eens bent met de stellingen? -- - +/- + ++ 1. Ik kan de totale marktvraag naar producten en diensten (die in mijn werk centraal staan) goed inschatten. 2.Ik kan nauwkeurig voorspellen wanneer grotere concurrenten de markt gaan betreden. 3. Ik ben in staat om een groot succes te maken van mijn bezigheden en anderen slagen daar wellicht niet in. Part 5: risk perception and representativeness Lees het volgende verhaal over meneer Jansen en probeert u zich te verplaatsen in hem. Daarna volgen vier korte vragen over de case. Karel Jansen is een succesvolle manager bij Blok N.V. in Rotterdam. Hij heeft hier nu vier jaar werkervaring en bekleedt een hoge functie. Hiervoor was hij een handelaar bij een plaatselijk bedrijf in Schiedam. Echter, hij vindt het leuk om zijn eigen baas te zijn en om risico’s te nemen, waardoor hij misschien wel miljonair kan worden. Om dit te bereiken zit hij eraan te denken om ontslag te nemen, om zodoende een eigen bedrijf te starten… Meneer Jansen heeft een gat in de markt ontdekt, en hij is aan het uitzoeken of zijn idee realistisch is om door te voeren. Hij heeft geen geld om marktonderzoek te verrichten, zodat hij had kunnen zien of zijn ondernemersidee wel waardevol is. Hij heeft gesproken met een paar goed geïnformeerde potentiële klanten, om te kijken of het de moeite waard is om zijn nieuwe ondernemersidee uit te voeren. Die hebben meneer Jansen positieve feedback gegeven hierover. Maar ook zijn naaste The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 72
    • Ahmed Bulut vrienden adviseren hem om dat wereldje in te stappen. Meneer Jansen is erg enthousiast over zijn nieuwe ondernemersidee, hoewel hij geen ervaring heeft in die branche, noch met het runnen van een eigen bedrijf. Naar zijn gevoel zal hij zakken met geld verdienen als hij invulling geeft aan dit ondernemersidee. Dit, op basis van de adviezen van zijn potentiële klanten en vrienden. Bestaande bedrijven zijn ook op de hoogte van het ondernemersidee dat meneer Jansen heeft, maar tot nu toe hebben die bedrijven niets gedaan met dat idee. Meneer Jansen heeft het idee dat deze bedrijven deze kans alleen zouden benutten zodra bewezen is dat het een succesvol concept is. Hij is er niet zeker van of de markt groeiende of verzadigd is. Meneer Jansen komt erachter dat er maar een paar bedrijven zijn die het overleefd hebben in diezelfde branche. Meneer Jansen denkt 200.000 euro nodig te hebben om zijn idee tot uitvoer te brengen, maar hij heeft momenteel slechts 70.000 euro op zijn bankrekening staan. Dus hij moet het resterende bedrag lenen of anders vrienden en kennissen vragen hem financieel bij te staan. Kunt u hieronder aangeven in hoeverre u het eens bent met de stellingen over het ondernemersidee van meneer Jansen? -- - +/- + ++ 1. Het uitvoeren van dit ondernemersidee brengt veel risico’s met zich mee. 2. De kans op een mislukking is groot. 3. Als Karel Jansen dit idee exploiteert zal hij financieel gezien veel verliezen. 4. Er is een hoop onzekerheid gemoeid met het voorspellen van het succes van dit ondernemersidee. Als u Karel Jansen zou zijn, zou u dan Blok N.V. verlaten om voor uzelf te beginnen? A) Nee. B) Ja. Kunt u hieronder drie kwesties uit de case noemen die uw mening (over of meneer Jansen voor zichzelf moet beginnen) hebben beïnvloed? Omschrijf deze alle drie kort en bondig (in elk vakje één kwestie). A) B) C) Part 6: status quo bias Hierna leest u vijf korte praktijksituaties. Per situatie wordt u gevraagd hoe u zou handelen in de desbetreffende situatie. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 73
    • Ahmed Bulut 1. Tijdens uw laatste boottocht in Amsterdam valt uw nieuwste MP3-speler (van het merk Creative) in de gracht. Hierdoor bent u ook uw opgeslagen muzieknummers kwijt. U besluit om een nieuwe MP3speler te kopen. Welk model zou u aanschaffen? A) Ik kies een Creative (8 GB geheugen, 119 euro). B) Ik kies een iRiver (2 GB geheugen, 79 euro). C) Ik kies een Samsung (12 GB geheugen, 159 euro). 2. U bent eigenaar van een servicebedrijf met vier vestigingen. Vanwege ruimtegebrek wilt u nieuwe bedrijfsruimte huren. U heeft een en ander uitgezocht en bent tot de conclusie gekomen dat er drie reële mogelijkheden zijn. Deze drie locaties zijn verspreid over een stad, met verschillende layouts van het pand en verschillende huurprijzen. Uw huidige vier vestigingen zijn gelegen in een gemiddelde wijk. Welke bedrijfsruimte gaat u huren? A) Accommodatie A: gemiddelde wijk, gemiddelde layout, hoge prijs. B) Accommodatie B: slechte wijk, goede layout, gemiddelde prijs. C) Accommodatie C: goede wijk, slechte layout, goede prijs. 3. U zit in een café in Parijs, en uw digitale camera ligt naast u op tafel. Uit het niets raast een dief langs die uw camera steelt. U heeft al een avondje afgesproken met uw vrienden zodra u weer thuis bent en u wilt het niet laten om hen de foto’s te laten zien die u morgen wilde maken van uit trektocht door Parijs, waaronder een bezoekje aan de Eiffeltoren. U besluit om meteen een nieuwe camera te kopen. Uw laatste foto’s had u met digitale camera A genomen. Welke camera gaat u kopen? A) Digitale camera A: 5 megapixel, 2 GB geheugen, 450 euro. B) Digitale camera B: 3 megapixel, 1 GB geheugen, 299 euro. C) Digitale camera C: 2 megapixel, 512 MB geheugen, 199 euro. 4. Twee maanden geleden heeft u een nieuwe grijze Audi A3 besteld bij de autodealer. U heeft met de dealer afgesproken dat de auto wordt afgeleverd met de extra’s die u toen kenbaar had gemaakt. Echter, één maand geleden informeerde de dealer u dat de fabriek de productie van Audi’s met extra opties heeft verminderd. Om alsnog zo snel mogelijk aan een Audi A3 te komen, heeft u met de dealer afgesproken dat u elke kleur waarmee de A3 binnenkomt accepteert, ook al is het niet grijs. Vanmorgen bent u door de dealer gebeld met de mededeling dat u uw nieuwe A3 op kunt komen halen. Aangekomen bij de dealer bent u verrast, want diezelfde ochtend zijn er vier Audi A3’s afgeleverd met verschillende kleuren, allen met de dezelfde extra’s die u twee maanden geleden had afgesproken. Welke auto neemt u mee? A) De originele grijze Audi A3. B) Een blauwe Audi A3. C) Een rode Audi A3. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 74
    • Ahmed Bulut D) Een zwarte Audi A3. 5. Tijdens uw bezoek aan het reisbureau (samen met uw beste maatje) wilt u een zonvakantie boeken. Er zijn vier mogelijkheden (Griekenland, Egypte, Spanje en Portugal). De prijzen zijn voor alle vier de bestemmingen hetzelfde (499 euro per persoon, all inclusive, inclusief vliegtickets). Echter, jullie hebben allebei een kortingsbon van 100 euro, die alleen voor Portugal geldt. Hierdoor kunt u voor 399 euro naar Portugal. Jullie besluiten om deze reden naar Portugal te gaan. Twee dagen voor vertrek ontvangen jullie alle benodigde reisbescheiden, inclusief tickets. De tassen zijn ingepakt, maar dan krijgen jullie onverwachts telefoon vanuit het reisbureau dat de korting niet alleen voor Portugal geldt, maar ook ingezet kon worden op de andere bestemmingen. Het reisbureau vraagt of jullie nog eventueel van bestemming willen veranderen. Wat wordt uw keuze? A) Ik wil alsnog naar Portugal. B) Ik wil naar Griekenland. C) Ik wil naar Egypte. D) Ik wil naar Spanje. Part 7: comments Mocht u naar aanleiding van deze enquête opmerkingen hebben, dan kunt u deze hieronder vermelden. U bent aan het einde gekomen van deze vragenlijst. Graag wil ik u bedanken voor uw medewerking! Met vriendelijke groet, Ahmed Bulut. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 75
    • Ahmed Bulut Appendix 4: additional statistics General statistics Here, tables are included about general results about the response. Sex N % Male 82 71,3 Female 33 28,7 Total 115 100 Distribution of sex. Education N % Elementary - - Secondary 4 3,5 “HAVO” or vocational 23 20 High school 40 34,8 University degree 48 41,7 Total 115 100 Highest education attained. Type N % Intrapreneur 72 62,6 Independent entrepreneur 43 37,4 Total 115 100 Response by type of entrepreneur. Employment duration N % < 1 year 25 21,7 Between 1 and 2 years 16 13,9 Between 2 and 5 years 21 18,3 Between 5 and 10 years 44 38,3 > 10 years 9 7,8 Total 115 100 Employment duration. Age Min. Max. X σ −1 Age distribution 22 56 34 7,5 Age of the respondents. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 76
    • Ahmed Bulut Comparison of random data splitting Here, a comparison of two randomly subsets of the data is analyzed. Variable X sub group 1 X sub group 2 Sig. level Overconfidence 3,76 (n=54) 3,87 (n=55) ,57 N.S. Illusion of control 3,60 (n=52) 3,55 (n=56) ,70 N.S. Representativeness ,64 (n= 53) ,89 (n=53) ,44 N.S. Status quo bias 3,04 (n=54) 2,96 (n=56) ,72 N.S. Risk perception 2,30 (n= 54) 2,26 (n=55) ,70 N.S. E.O. 3,87 (n=57) 3,85 (n=58) ∆X ,80 N.S. T-test (N.S = not significant). Comparison between entrepreneur types Here, independent entrepreneurs and intrapreneurs are compared on the study variables. Variable X intrapre. X indep. entre. Sig. level Overconfidence 3,38 (n=68) 4,54 (n=41) ,00 Illusion of control 3,28 (n=67) 4,04 (n=41) ,00 Representativeness ,06 (n=66) 1,93 (n=40) ,00 Status quo bias 2,88 (n=69) 3,20 (n=41) ,14 N.S. Risk perception 2,48 (n=69) 1,93 (n=40) ,00 E.O. 3,69 (n=72) 4,15 (n=43) ∆X ,00 T-test (N.S = not significant). Multicollinearity analysis In the table below, ratios measuring the level of multicollinearity are included. This table refers to the multivariate analysis as depicted in table 4 of chapter 4. Model 1: risk Model 2: E.O. Model 3: E.O. Model 4: E.O. perception VIF Tol. VIF Tol. VIF Tol. VIF Tol. Risk propensity 1,07 ,94 1,07 ,94 1,00 1,00 1,07 ,94 Overconfidence 1,60 ,63 1,60 ,63 1,77 ,56 Illusion of control 1,37 ,73 1,37 ,73 1,53 ,66 Representativeness 1,38 ,73 1,38 ,73 1,54 ,65 Status quo bias 1,05 ,95 1,05 ,95 1,05 ,95 1,90 ,53 Risk perception 1,00 1,00 VIF and tolerance ratios. The battle of entrepreneurial orientation between independent entrepreneurs and intrapreneurs 77